Tesla boss Elon Musk revealed a 9.2% stake in Twitter Inc. on Monday, prompting a massive increase in shares of the company of which he may now be the largest owner.
The disclosure comes right after his tweet that he was giving a “serious thought“to build a new social media platform, while challenging Twitter’s commitment to free speech.
A filing showed Musk owns 73.5 million Twitter shares, which were worth about US$2.9 billion based on the share price of $39.31 at the close of trading on Friday.
On Monday morning, the price of Twitter shares soared to over $48, increasing Musk’s stake in the process.
A prolific Twitter user, Musk has more than 80 million followers since joining the site in 2009 and has used the platform to make several announcements, including teasing that he was going to take Tesla private at $420 a share. .
No such deal was in the works, which is why securities regulators have tried to crack down on the billionaire ever since. In October 2018, Musk and Tesla agreed to pay $40 million in civil fines and that Musk have his tweets cleared by a corporate attorney because of this saga.
But his lawyers are now fighting to have that deal torn up.
Last month, Musk asked U.S. District Court Judge Alison Nathan to void the settlement agreement. His attorney, Alex Spiro, said the SEC used the court agreement “to trample on Mr. Musk’s First Amendment rights and impose prior restrictions on his speech.”
As part of that legal battle, the SEC revealed it was also investigating a tweet by Musk from last November in which he asked his followers if he should sell 10% of his Tesla stock to pay his taxes.
Questions about the future of Twitter
Musk’s minority stake in Twitter is already raising questions about whether he will buy more of the company or push for changes.
“We would expect this passive participation to be just the start of broader conversations with Twitter’s board/management that may ultimately lead to active participation and potentially more aggressive ownership of Twitter” , Wedbush analyst Dan Ives wrote in a note.
While news of the deal boosted the company’s value, some analysts say the move could be more of a hassle than it’s worth for Twitter.
The company has been targeted by shareholder activists Elliot Management Corp. last year because they didn’t like Jack Dorsey being CEO of Twitter but also of payment company Square. The shareholders argued that one person couldn’t do both tasks at once, and Twitter suffered as a result.
Elliot Management apparently won that fight when Dorsey stepped down as CEO of Twitter last year.
The news that Musk is now taking a stake in the company could lead to similar headaches, especially if he tries to buy the whole company or push for changes there.
“While we don’t expect the company to be privatized in the short term, it could present a challenge for new CEO Parag Agrawal, who has focused on new products to facilitate monetization,” Mandeep Singh said. , analyst at Bloomberg Intelligence.
“Musk’s suggestions may be at odds with the Elliott and Silver Lake campaigners, who are more focused on improving operations and free cash flow.”