Elon Musk wants to buy Twitter. Elon Musk wants to influence Twitter. Elon Musk wants to poke Twitter until he gets bored. It’s hard to know what’s inside the head of the Tesla chief executive, who became Twitter’s biggest shareholder and then almost face-to-face on Saturday snubbed a seat on the board. The most realistic prediction about his future actions came from Twitter chief Parag Agarwal on Sunday night: “There will be distractions ahead.”
Musk’s being on the board meant that the billionaire could only cause trouble inside Twitter and within strict constraints: Musk’s 9% stake could not exceed 14.9%. He will be a Class II director until 2024, preventing him from taking over the company’s board. Not only would he be unable to take over Twitter, but he also wouldn’t have much of an impact on the service. Still, snatching a board seat is the opposite of how active shareholders operate in general. Elliott Management, which owns a major stake in Twitter, pushed to replace CEO Jack Dorsey in 2020 and named four directors to the board to give it more influence. But Musk doesn’t go down the traditional route. He can tweet a product idea to his 80 million followers in just one weekend and get Twitter to accelerate changes that may or may not be in the pipeline.
If buying 9% of Twitter was a capitalist power game, then rejecting a board seat was a nuclear drop-kick for the social media age. Musk has put himself in a position where he can now buy significantly more stock. He can lead the company on product ideas with the support of millions of Twitter users. He is free to bring down his stake to 51% and become the majority shareholder. He may initiate a hostile bid.
So why were Twitter shares down 7% on Monday morning, eroding gains from Musk’s investment enthusiasm? Most likely because investors don’t buy it. Neither do I
One thing we know for sure about Elon Musk is that he is unpredictable. But I’ll go out on a limb for predicting anyway: Musk probably won’t be acquiring Twitter. Influencing a company is more fun for someone like him than being the majority owner of it. Musk doesn’t buy companies. He builds them from the ground up. With assets already in the market—think Dogecoin, Bitcoin, Gamestop or ETC—he tends to talk them up and increase their value, before losing interest and moving on. When Musk tweeted that he “kinda loves it” in January of last year, the stock jumped 9%. The same day he did “Gamestonek!!” tweeted. And GameStop shares went up 60%. By the following month, Etsy had fallen 17%, GameStop nearly 87%. Musk is great at drawing attention to assets, sprinkling them with the fairy dust of his brand that draws legions of new fans, but he’s not great at associating those assets with long-term value.
Twitter is of course a different story. Musk has spent nearly $3 billion to become the largest shareholder of the social-media firm, and he appears to have held serious discussions with its management. But as someone who has repeatedly poked his nose at the U.S. Securities and Exchange Commission, he’s poorly suited to guide the social-media business, with policymakers in Europe and elsewhere flouting new rules. Follow up is included.
Judging by his tweets, Musk’s interest in Twitter seems more geared towards influencing the company in a direction that best suits his ideological worldview, which, despite his brilliant engineering mind, somewhat distorts the meaning of free speech. understanding is involved.
For example, he has falsely promoted the notion that Twitter is a “public class” obliged to defend free speech. As a private company, it is not so. In his own business, he has combined free speech with offensive speech, citing Afrikaans-“thick-skinned” American workers at the Tesla factory over racist language. He also tweeted a meme last February comparing Canadian Prime Minister Justin Trudeau to Adolf Hitler.
In March, as he was quietly accumulating shares on Twitter, Musk polled his followers with a loaded question about free speech. This kind of discussion is important in itself, but none of it is helpful for Twitter as a company. As Agarwal rightly pointed out, posting silly polls is a distraction for millions of fans, it’s not a smart way to drive a product online.
Best of all, Musk is trolling Twitter’s management. At its worst, he wants to push the company to loosen its new moderation standards, giving it more leeway to tweet about any topic from Gamestop to Tesla and SpaceX, or give it a go. Attention is required. Somewhere in between, he’s turning Twitter into a volatile meme stock that can jump or slide with his state of mind. If history suggests anything, Musk is more likely to cause trouble than he is to bid adieu to Twitter.
Parmy Olson is a Bloomberg Opinion columnist covering technology.