SAN FRANCISCO (AP) — Billionaire Elon Musk, one of Twitter's largest shareholders, is retiring and will no longer serve on the company's board of directors less than a week after the company's acquisition.
Twitter CEO Parag Agrawal broke the news, which followed Musk's tweets over the weekend and proposed changes to Twitter, including a ban on ads on the site. Nearly 90% of Twitter's revenue in 2021 came from ads.
"Elon's appointment to the board officially went into effect on September 4th, but on the same morning, Elon announced that he would not be on the board," Agrawal wrote in a retweet of a note originally sent to fans on Twitter. "I think it's for the best."
Agrawal didn't explain Musk's obvious decision. He said the board understands the risks of having Musk, now the company's largest shareholder, a member. But at the time, "I thought that Elon as a corporate agent, where he, like all board members, should act in the interests of the company and all of our shareholders, would be the best way forward," he wrote. .
Just a week ago, regulatory reports showed that Musk quickly acquired just over 9% of the social media platform. The fickle billionaire has been buying stock in batches almost every day since January 31st. Only the Vanguard mutual fund and the ETF group control more shares of Twitter.
Twitter was quick to give Musk a seat on the board on the condition that he own no more than 14.9% of the company's existing shares, according to a regulatory filing.
Now that Musk is out of business, he could increase his stake in Twitter, maybe try to take over the company or force the new roster of managers to change direction.
"If you're looking to acquire a company, you're generally in a better position if you're not on the board of directors," said Harry Kramer, clinical professor at Northwestern University's Kellogg School of Management.
Because a member of the board of directors is obliged to receive the maximum possible profit from all shareholders of the company.
“Joining a board of directors comes with a special responsibility to ensure that you do nothing for your own benefit,” said Kramer, who is also chairman and former CEO of Baxter International.
In a filing with regulators on Monday, Musk said he has "no predetermined plans or intentions" on how to use his influence on Twitter, but he can discuss possible mergers, strategy and other matters with his board and thinking. has the meaning. . He added that he could express his opinion "through social networks or other channels."
If Musk had been on the board, it might have stopped him from rocking the boat so much, said Chester Spatt, a professor of finance at Carnegie Mellon University and a former chief economist with the U.S. Securities and Exchange Commission.
“There is an old saying about keeping someone in a tent,” Spath said. "There were benefits to making it a bit restrictive."
While Musk has been one of Twitter's most outspoken critics, the sudden departure from the board, which became official on Saturday, could indicate that the relationship between Musk and Twitter will become even more strained.
“At some point, he may fire managers, he may replace the board,” Spatt said.
In a letter to staff announcing Musk's departure, Agrawal wrote that "there will be distractions in the future, but our goals and priorities remain the same."
Shares of Twitter Inc. rose sharply. , which rose nearly 30% after Musk's share was posted last week, rose 2.8% on Monday after fluctuating between profit and loss throughout the morning.
Musk's 81 million Twitter followers make him one of the most popular personalities on the platform, rivaling pop stars like Ariana Grande and Lady Gaga. But because of his many tweets, he sometimes got into trouble with the SEC and others.
In 2018, Musk and Tesla agreed to pay $40 million in civil penalties, and Musk got approval for his tweets from a corporate lawyer after tweeting that he had the money to pay Tesla $420 a share. It didn't happen, but thanks to the tweet, Tesla's stock price skyrocketed. Musk's latest issue with the Securities and Exchange Commission may be his delay in reporting his growing Twitter presence to regulators.
Musk sent out several tweets over the weekend signaling a potential move on Twitter before changing course for a board seat.
Some of them have since closed, such as his proposal for an ad-free Twitter or the conversion of the social network's San Francisco headquarters into a homeless shelter.
Musk then posted a number of cryptic tweets Sunday night, including one with a meme that read, "Honestly, Your Honor, my client was in puck mode," and then another that read, "Explain everything." Another tweet later showed a closed mouth emoji.
Musk has described himself as "an absolute supporter of free speech" and stated that he does not believe that Twitter adheres to the principles of free speech. This view is shared by supporters of Donald Trump and a number of other right-wing politicians whose accounts have been blocked. . for violating Twitter's content rules.
Last week, the CEO of Twitter and several of his board members publicly praised Musk and suggested that his ideas be taken seriously. However, the company clarified that, as a member of the board of directors, he cannot make day-to-day decisions or change policies, such as lifting Trump's ban.