SAN FRANCISCO (AP) — Billionaire Elon Musk, one of Twitter’s biggest shareholders, is changing course and will no longer serve on the company’s board of directors, less than a week after he was given a job..
Twitter CEO Parag Agrawal announced the newsthat followed a weekend of Musk tweets suggest changes to Twitter, including removing advertising from the site. Nearly 90% of Twitter’s revenue in 2021 came from ads.
“Elon’s appointment to the board was officially effective April 9, but Elon shared earlier that morning that he would not be joining the board,” Agrawal wrote in a republished note originally sent to Twitter employees. “I think this is for the best.”
Agrawal did not offer an explanation for Musk’s apparent decision. He said the board understood the risks of having Musk, who is now the company’s largest single shareholder., As a member. But at the time, “I believed that having Elon as a trustee of the company, where he, like all board members, has to act in the best interest of the company and all of our shareholders, was the best way forward.” , wrote.
Just a week earlier, regulatory filings revealed that Musk had quickly amassed a slightly over 9% stake in the social media platform. The fickle billionaire had been buying shares in almost daily batches starting on January 31. Only Vanguard Group’s set of mutual funds and ETFs controls more Twitter stock.
Twitter quickly gave Musk a board seat on the condition that he owns no more than 14.9% of the company’s outstanding shares, according to a regulatory filing.
Now that Musk has backed out of the deal, he is free to increase his involvement with Twitter, perhaps to try to take over the company or push for a new slate of directors to change direction.
“If you want to take over a company, you’re generally in a better position not to be on their board,” said Harry Kraemer, a clinical professor at Northwestern University’s Kellogg School of Management.
This is because the responsibility of a board member is to obtain the best value for all the shareholders of the company.
“Being on a board has a very specific responsibility to make sure you’re not doing something in your own personal interest,” said Kraemer, also a former chairman and CEO of Baxter International.
In a regulatory filing on Monday, Musk said he had “no pre-set plans or intentions” for how to use his influence on Twitter, but that he may discuss with his board and management his thoughts on potential business combinations, strategy and other matters. He added that he can express his views “through social media or other channels.”
Had Musk taken a seat on the board, it might have discouraged him from rocking the boat too much, said Chester Spatt, a finance professor at Carnegie Mellon University and a former chief economist at the US Securities and Exchange Commission.
“There’s an old cliché about keeping someone inside the store,” Spatt said. “There were advantages to having it a little restricted.”
While Musk has been one of Twitter’s loudest critics, the sudden withdrawal of the board, which became official on Saturday, could indicate that relations between Musk and Twitter will become more acrimonious.
“At some point I could kick out the directors, I could replace the board,” Spatt said.
In a letter to employees announcing Musk’s departure, Agrawal wrote that “there will be distractions ahead, but our goals and priorities remain unchanged.”
Shares of Twitter Inc., which rose nearly 30% after Musk’s involvement went public last week, rose 2.8% on Monday after swinging between gains and losses in the morning.
Musk’s 81 million followers on Twitter make him one of the most popular figures on the platform, rivaling pop stars like Ariana Grande and Lady Gaga. But his prolific tweets have at times gotten him in trouble with the SEC and others.
Musk and Tesla agreed in 2018 to pay $40 million in civil penalties and to have Musk’s tweets approved by a corporate lawyer after he tweeted about having the money to take Tesla private at $420 a share. That didn’t happen, but the tweet sent Tesla’s stock price higher. Musk’s latest issue with the SEC could be his delay in notifying regulators about his growing involvement in Twitter.
Musk, before changing course in the board seat, sent out a series of tweets over the weekend referring to possible changes on Twitter.
Many of them, like his proposal for an ad-free Twitter or turning the social media company’s San Francisco headquarters into a homeless shelter, have since been removed.
Musk then posted a few cryptic tweets on Sunday night, including one that featured a meme that read, “To be fair, your honor, my client was in goblin mode,” followed by one that read “Explain everything.” Another subsequent tweet was of a hand over mouth emoji.
Musk has described himself as a “free speech absolutist” and has said he does not believe Twitter lives up to the principles of free speech, a view shared by supporters of Donald Trump and other figures. right-wing politicians who have had their accounts suspended for violating Twitter’s content rules.
Twitter’s CEO and many of his board members publicly praised Musk last week, suggesting they might take his ideas seriously. But the company had made it clear that as a board member he couldn’t make day-to-day decisions or change policies, such as overturning Trump’s ban.