April 13, 2022

Getty Images from https://www.esquire.com/lifestyle/a20895958/elon-musk-pravda-twitter/

Every billionaire needs his media platform. Hearst had the New York Journal, Turner has CNN, Murdoch has Fox News, Bezos has the Washington Post, and Elon Musk might just get Twitter.

With over 81 million followers, Musk’s memes and messages arguably reach a wider audience faster than any other publication online. While Zuckerberg and Facebook eventually disappear into the “meta-verse”, after year’s of unprofitably, Twitter might just be looking at a turn around if Musk can gain control.

After purchasing almost 10% of Twitter, making him the single largest shareholder, Musk and Twitter both made announcements that he would be joining the company’s board. The stock of Twitter was immediately up 25% on the news. So far so good. Excited about his board position, Elon tweeted new ideas for Twitter such as paid accounts, ad-free subscriptions, edit features, and the like. Even Twitter’s CEO, Parag Agrawal joined these discussions as Elon posted various “important” polls on Twitter, ingeniously using Twitter’s own polling feature to ask its users whether Twitter should add a “edit” function to tweets.

But then Musk abruptly pulled out. After meeting and presenting its Board terms to Elon, which likely included provisions such as limiting him to 15% ownership in the company, strict confidentiality and other routine fiduciary duties, something else rubbed Elon the wrong way — — did Twitter’s board attempt to impose other conditions on Musk’s membership on the board, such as limiting his messaging on Twitter, and perhaps even limiting his ability to change Twitter’s censorship and content policies?

Here is what the CEO said about the awkward meeting:

Whatever it was, something akin to an SEC letter made Musk walk away from the deal. Following this news, Twitter’s stock drooped over 7%, and Musk cryptically tweeted “weather is fake, I seen Truman Show” and “69.420 statistics are fake”. In one foul swoop, Musk made a billion, ostensibly joined the board, left the board, lost hundreds of millions, and then made marijuana and other numerical innuendos on Twitter in frustration. Just another day in the life of the wealthiest person in the world. So what happened?

Like so many corporations these days, Twitter’s management likely caved to internal pressure from employees and group think fears about Elon and his free speech demands. He is also known for posting controversial memes which trigger people and probably Twitter’s own employees and the thousands of “content moderators” (or censors) feared that they could suddenly find themselves out of work if Elon was in management.

For someone who rarely tweets, Twitter’s CEO then tweeted that Musk’s decision was “good” for the company and that Twitter would face many “distractions” ahead. Although he didn’t tell us what those distractions would be, something tells me Twitter fears a shareholder proxy war with Musk

Musk’s instincts are probably right. Twitter is failing to monetize its platform and is alienating users through its content and censorship policies which are increasingly viewed as politically biased. Large swaths of conservative and libertarian users are simply abandoning the platform and making their way towards fledgling copycat sites such as “Gab” or “Truth Social”. However, those sites are getting nowhere and even Trump doesn’t actually use “Truth Social”.

And after walking away from the board position, Elon tweeted a poll that showed that Republicans, Democrats and Moderates have radically different levels of trust in major news sites such as CNN, the NY Times and Fox News, fracturing badly across party lines.

Elon rightly realizes that by making some simple tweaks and adjustments to Twitter, it can be reinstated as the largest public sphere in the world for both news and messaging. In Musk’s vision, the platform can be better monetized with paid subscriptions and less content discrimination.

Regardless of Elon’s intent or grand visions in taking a large portion of Twitter’s common shares, the implications of his share ownership are clear. A large enough purchase of its common shares buys Musk a seat on the Board. There he will have to play by the rules and likely pick fights with other board members, which he dislikes. That’s not his style as we have seen from Tesla and his board disputes there.

But Elon knows well that shareholders who own 51% or more of the outstanding shares can effectively run the company. They can vote out the existing Board at the annual meeting, insert their own members, and then change the company’s mangers, its policies and algorithms.

Zuckerberg has over 50% of Meta (Facebook) and has complete control to turn it into the meta-verse for good or bad. Amazon controls the Washington Post and can sway D.C. politics. That’s what Elon wants to do. He wants to craft Twitter into a media/news platform that aligns with his vision of the world and make it a more profitable company in the process. That seems to be working with Tesla and SpaceX. So why not Twitter?

If the Board won’t let Elon make the changes to turn Twitter around, Musk needs to decide whether he double downs on his shares or abandons this idea as some novel whim. As the richest man in the world, worth over $265 billion, Musk can easily buy Twitter himself, as the company has market cap of a little over $35 billion some of it now largely attributed to Musk pumping the shares up.

If Elon really wants to make a play for Twitter he can start buying more shares and allying with other large institutional share holders. While there may not be enough outstanding shares in the market for Elon to outright buy 51% of the company and wage a coup-d’etat, if he gets enough shares and other large shareholders on his side, Elon can wage an effective proxy fight for the company.

And something tells me this isn’t Elon’s last move on Twitter. The CEO’s reference to “distractions” ahead foreshadows an all out proxy war for Twitter’s future.