Elon Musk, CEO of Tesla, acquired a 9% stake in Twitter, becoming the social media platform’s largest shareholder at a time when he questions the social media platform’s commitment to free speech and the First Amendment.
The ultimate purpose of Musk’s 73.5 million share purchase, which is valued at approximately $3 billion, is unknown. Nonetheless, Musk, who has 80 million Twitter followers and is a frequent user of the platform, questioned Twitter’s free speech policy and whether the platform is undermining democracy in late March.
It is unknown precisely when Musk acquired the stake. According to a Securities and Exchange Commission filing made public on Monday, the triggering event occurred on March 14.
Musk has also hinted publicly, in front of his massive and devoted Twitter following, that he may launch a rival social media network.
Industry analysts and legal experts are sceptical that the mercurial CEO will remain on the bench for an extended period of time. Musk could immediately begin advocating for changes at Twitter if he so chooses.
CFRA Analyst Angelo Zino wrote in a note to investors that while Musk’s intentions are unclear, Twitter could be viewed as an acquisition target given the company’s share price decline since early last year.
In November, Jack Dorsey resigned as CEO. Musk’s stake in Twitter is more than four times that of Dorsey, who co-founded the company and was until Musk’s arrival the largest individual shareholder.
“Musk’s actual investment represents a negligible portion of his wealth, and an all-out buyout should not be ruled out,” Zino, a Twitter and social media reporter, wrote.
Musk may view Twitter as an investment with significant growth potential, or he may be purchasing for non-investment reasons, such as ensuring the platform does not restrict his speech, according to Erik Gordon, a law and business professor at the University of Michigan.
“What he may be concerned about is that if enough of his tweets appear to be disinformation, Twitter may respond by saying, ‘We are doing our job against disinformation.'” Gordon remarked.
No CEO would refuse to take a call from the company’s largest shareholder, Musk explained, adding that the acquisition gives Musk access to Twitter’s top management.
Musk has not stated how he intends to change Twitter’s rules, but the social media platform’s history of suspensions and bans is well-documented.
Former President Donald Trump was banned from Twitter and other major social media platforms last year after critics accused him of inciting the Jan. 6 Capitol riot. The ban has raised difficult questions about free speech in a social media industry dominated by a few tech giants — an issue seized upon by Trump and conservative media.
Musk received widespread praise from those circles on Monday.
Michael Flynn, a retired general who briefly served as Donald Trump’s national security advisor and was suspended from Twitter in January 2021, pleaded with Musk via Telegram for changes at Twitter, beginning with the restoration of banned Twitter accounts.
“Hey Elon, how about you reinstate all of those who were suspended from Twitter for being America First and Pro-Trump?” Flynn wrote.
Twitter suspended the personal account of far-right United States Representative Marjorie Taylor Greene earlier this year for multiple violations of the platform’s COVID-19 misinformation policy. The Georgia Republican’s account was permanently suspended under Twitter’s “strike” system, which employs artificial intelligence to identify posts about the coronavirus that are sufficiently misleading to endanger people. A second or third strike results in a 12-hour account lock. Four strikes result in a one-week suspension. Five or more strikes can result in an individual’s permanent removal from Twitter. Greene’s personal Twitter account had previously been suspended for periods ranging from 12 hours to a full week.
Other individuals banned from Twitter in recent years include Steve Bannon for suggesting the beheading of Dr. Anthony Fauci, David Duke, a former Ku Klux Klan leader, for violating Twitter’s hate speech policy, and right-wing conspiracy theorist Alex Jones and his Infowars show for abusive behaviour.
Monday, Twitter’s stock soared nearly 30%. Since March 14, the date listed on Twitter’s filing, the company’s shares have increased nearly 50%, indicating that Musk’s investment has paid off handsomely thus far.
A request for comment from Twitter was not immediately returned.
Musk told his millions of Twitter followers in March that he was ” seriously considering” creating his own social media platform, and has clashed with financial regulators numerous times over his use of Twitter.
Additionally, the purchase comes as Musk is embroiled in a bitter legal battle with the Securities and Exchange Commission over his ability to post on Twitter. His attorney has argued in court motions that the SEC is violating Tesla CEO Elon Musk’s First Amendment rights.
Musk and Tesla agreed in October 2018 to pay $40 million in civil penalties and to have Musk’s tweets approved by a corporate lawyer following his tweet about having the money to take Tesla private at $420 per share.
Although the funding was far from secured and the electric vehicle company remains publicly traded, Tesla’s stock price increased significantly. The settlement stipulated changes to the company’s governance, including Musk’s removal as chairman and pre-approval of his tweets. The SEC filed a securities fraud charge against Musk, alleging that he used his posts to manipulate the stock price.
Musk’s lawyer is now seeking to have the settlement thrown out by a United States District Court judge in Manhattan, claiming that the SEC is harassing him and infringing on his First Amendment rights.
The SEC responded in a court filing, asserting that it has legal authority to subpoena Tesla and Musk regarding his tweets and that Musk’s motion to vacate the settlement is invalid.
Additionally, the SEC disclosed that it is investigating Musk’s Nov. 6, 2021 tweets in which he requested feedback on whether he should sell 10% of his Tesla stake. The commission confirmed that it issued administrative subpoenas in connection with its investigation into Musk and Tesla’s compliance with the 2018 agreement’s disclosure controls.
Musk ultimately sold over 15 million shares worth approximately $16.4 billion. Musk is close to selling 10% of his stock following some sales in late December.
Musk’s disclosure about his Twitter stake comes two days after Tesla Inc. announced its first-quarter delivery figures. While the company delivered 310,000 vehicles during the period, this was slightly less than expected.
From Providence, Rhode Island, Matt O’Brien and Michelle R. Smith contributed. Krisher contributed reporting from Detroit.