Twitter’s chief executive knows this will not be the end of it. Announcing that Elon Musk will not join the company’s board, Parag Agrawal wrote: “There will be distractions ahead.”
Interference is hard to avoid when one of your largest shareholders has more than 80 million followers on your platform and a penchant for impulsive use of the tweet button. Since it emerged last Monday that the world’s wealthiest person controls 9.2% of Twitter, Musk has lived up to his reputation for shoot-first-ask-later tweeting.
In a stream of posts, some of which have been deleted, Musk flagged a number of potential changes to the platform. As is often the case with the Tesla chief executive, it was hard to separate visionary business guidance from mischief.
Among the removed tweets was a suggestion that Twitter’s premium service should be made ad-free. This broached a commercially heretical path for a business that makes 90% of its annual revenue of $5bn (£3.8bn) from advertising. Musk’s justification for such a move was characteristically blunt: “The power of corporations to dictate policy is greatly enhanced if Twitter depends on advertising money to survive.”
As per Agrawal’s reference to distractions, just because Musk is no longer joining the Twitter board, it does not mean he will fade into the background. It is not Musk’s style, a point reinforced by his filings with the US financial watchdog related to the investment. He filed disclosure of his shareholding to the US Securities and Exchange Commission last Monday with a schedule 13G, which is for passive investors who are not preparing to shake up the business in question.
The next day he refiled it as a schedule 13D, for investors who intend to take an active role. As a board member, Musk’s stake would have been capped at 14.9%, but not any more. He has since refiled the 13D, with an amendment flagging that he may express his views about the company “through social media”.
Dan Ives, the managing director of the US investment firm Wedbush Securities, said he believed Twitter’s board and Musk could not reach an agreement over how the billionaire communicates with the public about the company, given that a board seat implies a more measured stance.
“This now goes from a Cinderella story with Musk joining the Twitter board and keeping his stake under 14.9% helping move Twitter strategically forward to likely a ‘Game of Thrones’ battle between Musk and Twitter,” said Ives. He added that there was a “high likelihood” that Elon would take a more hostile stance towards Twitter and build his stake further.
Twitter is used to activist investors at least, having negotiated a deal with the US investment firm Elliott Management in 2020 that included bringing in a new investor, the private equity firm Silver Lake, with both of them taking boardroom seats. Elliott retains a 1.25% stake in Twitter. It has also emerged that Vanguard, a US asset manager, is now Twitter’s biggest shareholder with a 10.3% stake, ending Musk’s brief reign as the biggest investor, although he remains the largest individual shareholder.
The reaction of shareholders to Musk’s stake acquisition, and subsequent appointment to the board, indicated excitement over a potential shake-up, or sale of the $37bn company, as shares rose 17% last week. Twitter’s problems are longstanding and are focused on slow growth in both revenue and subscriber numbers. In its most recent quarterly results, revenue grew more slowly than expected, despite rising 22% to $1.6bn in the last three months of 2021. However, daily active users rose by 25 million over the year to 217 million as the company reiterated its goal of hitting 315 million of such users by the end of next year.
One of Musk’s undeleted tweets over the past seven days reflected investors’ concerns over growth. Posting a list of Twitter’s top 10 accounts, which includes his own and is topped by Barack Obama, Musk said most of the accounts tweet rarely and post little content, adding: “Is Twitter dying?”
The reference to corporate mortality is typical Musk hyperbole, but he was voicing fears over growth that are thrown into stark relief by the march of rivals like TikTok.
Mindful of competition and investor impatience, Twitter has been making changes over the past year. As well as exploring ways of making the site less confrontational, it has introduced new features like Twitter Blue, its $2.99-a-month premium service that gives users a 30 second window to edit tweets before they appear online. Blue is available in the US, Canada, Australia and New Zealand.
Agrawal’s predecessor, Jack Dorsey, has also backed Musk’s call for Twitter users to be able to decide which algorithm they use to curate their experience on the platform, or to build their own.
One of Musk’s notions last week was endorsed by the world’s second-wealthiest person, Jeff Bezos. The Amazon founder, responding to a subsequently deleted Musk poll asking whether Twitter should turn its HQ into a homeless shelter, tweeted a link to an article about a shelter on Amazon’s Seattle campus. Responding, Musk tweeted: “Great idea”.
For one corporate governance expert, the main issue with Musk joining the Twitter board is time and the electric car company that he presides over. “He is running Tesla. He does not have time for Twitter. His job at Tesla is not an easy one and he is receiving enormous amounts of money to be there,” said Charles Elson, the founding director of the Weinberg Center for Corporate Governance at the University of Delaware. Musk is also the CEO of the space rocket company SpaceX.
Elson added that Musk, Twitter account at the ready, would remain highly influential outside the boardroom regardless.
“Frankly, he has just as much influence where he is.”