Now that Elon Musk won’t be Twitter’s new board member, that means more speculation about his true intentions and, yes, more paperwork. Musk has again updated the required filing (pdf) for investors buying a significant portion of a publicly traded company, where investors must explain their intentions.
The new form confirms that any agreements preventing Musk from buying a significantly larger stake in the company are gone, and outlines several ways he can make his voice heard going forward. The result is evidence for anyone who suspects Musk’s reversal had something to do with the legal requirements that would come with serving on the Twitter board.
Last week, Musk filed a Schedule 13G form with the SEC on April 4 (read here, pdf), which was quickly scrutinized when his upcoming board seat was announced because the form is intended for investors who plan to remain passive in the affairs of a company – sitting on a board of directors is not exactly passive.
Now Elon is Twitter’s second largest shareholder
He clarified this issue with an updated Scheduled 13D document (read here, pdf), suitable for an “active” investor, detailing his stock purchases, noting an agreement not to attempt to tweet more than 14.9 percent – to buy stocks. Still, the amended filings aren’t enough to answer the question of how long he waited to disclose his stock purchases and any response from the SEC.
Musk says he currently owns 9.1 percent of the shares outstanding with 73,115,038. Interestingly, while he remains Twitter’s largest single shareholder, he doesn’t own the largest stake in the company. Protocol notes that mutual fund The Vanguard Group announced on Friday that it now owns 82,403,665 shares, enough for a 10.29 percent stake in the company, although ownership is split among all fundholders.
That board of directors deal is over and now the new document is here, so what’s changed? The only significant difference is Section 4, which previously contained language limiting Musk to a 14.9 percent stake in the company. Now that language is gone, replaced with a note stating what the reporter (Musk) “might be doing,” and it focuses on two specific things.
What the April 5 filing said:
On April 4, 2022, the Reporting Person and the Issuer entered into a written agreement (the “Agreement”) which provides that: (i) the Issuer will appoint the Reporting Person to the Board of Directors of the Issuer (the “Board”) as a director of Class II with a term of office expiring at the Issuer’s 2024 annual general meeting; and (ii) while the reporter is a director and 90 days thereafter, the reporter will not, alone or as a member of a group of beneficial owners, own more than 14.9% of the shares of the issuer’s common stock then outstanding, including, for these purposes, economic exposure through derivative securities, swaps or hedging transactions.
What the updated filing says, registered April 11:
From time to time the reporting person may have discussions with the Board of Directors and/or members of the Issuer’s management team including but not limited to potential business combinations and strategic alternatives, the business, operations, capital structure, governance, management, strategy of the Issuer and other matters affecting the Issuer. The reporting person may express its views to the Board of Directors and/or members of the Issuer’s management team and/or the public through social media or other channels in relation to the Issuer’s business, products and service offerings.
In his letter to employees Sunday night, Twitter CEO Parag Agrawal said called from Musk that “we will remain open to his input,” and Elon’s letter suggests there will be plenty of it. How much of this comes in discussions with the board and management versus social media deliberations may determine how much of the “distraction” Agrawal warned about actually materializing.
It’s unclear what prompted Musk to tell the board Saturday morning that he would not join them as a member, but it leaves his future plans unclear. In the document, Musk states that he does not currently plan to purchase any more shares in the company (which is covered under item 4 of the new filing as part of a series of solicitations for the new shareholder), but also says that he “reserves that.” Right to change its plans at any time in its sole discretion.”