Tesla and SpaceX Chief Executive Officer Elon Musk speaks at the SATELLITE Conference and Exhibition in Washington. Photo / AP
Tesla and SpaceX Chief Executive Officer Elon Musk speaks at the SATELLITE Conference and Exhibition in Washington. Photo / AP
Tesla billionaire Elon Musk has bought a 9.2 per cent stake in Twitter, sending stocks in the online platform soaring.
Musk, the richest man in the world with a fortune of $273 billion, bought more than 73 million Twitter shares on March 14, a US securities filing shows.
The stake is worth US$2.89 billion ($4.16 billion), based on Twitter's Friday closing price.
The groundbreaking buy-in has made Musk one of the largest shareholders in the company and he now controls more than four times the stock of its founder Jack Dorsey, who owns just 2.25 per cent.
Investors responded quickly. Shortly after US markets opened, Twitter's stock was trading at about $49, up by around 26 per cent.
"We would expect this passive stake as just the start of broader conversations with the Twitter board/management that could ultimately lead to an active stake and a potential more aggressive ownership role of Twitter," analysts Daniel Ives and John Katsingris of Wedbush wrote in a note.
Given that Twitter serves as the de facto public town square, failing to adhere to free speech principles fundamentally undermines democracy.
The ultimate aim of Musk's 73.5 million share purchase is not known. Yet in late March Musk, who has 80 million Twitter followers and is very active on the site, questioned free speech on Twitter and whether the platform is undermining democracy.
It's unclear just when Musk bought the stake. The US Securities and Exchange Commission filing made public on Monday says the event triggering the filing happened March 14.
Industry analysts and legal experts are skeptical about whether the mercurial CEO will remain on the sidelines for long. Musk could begin advocating for changes at Twitter immediately if he chooses.
In a note to investors, CFRA Analyst Angelo Zino wrote that although Musk's intent is unclear, Twitter could be viewed as an acquisition target because the value of its shares have been falling since early last year.
Jack Dorsey stepped down as CEO in November. Musk's stake in Twitter is more than four times the size of Dorsey's, who co-founded the company and was the largest individual shareholder until Musk arrived.
"Musk's actual investment is a very small percentage of his wealth, and an all-out buyout should not be ruled out," wrote Zino, who covers Twitter and social media.
Musk could see Twitter as an investment with big growth ahead, or he could have noninvestment reasons for the purchase, such as buying to make sure the platform doesn't restrain his speech, said Erik Gordon, a law and business professor at the University of Michigan.
"What he could be worried about is if enough of his tweets start to look like disinformation, that Twitter says 'we're doing our job against disinformation'." Gordon said.
No CEO would refuse to take a call from the company's top shareholder, so the purchase gives Musk access to Twitter's top management, he said.
Musk has not spoken specifically about how he would change rules at Twitter, but the social media platform's history of suspensions and bans is well documented.
The logo for Twitter appears above a trading post on the floor of the New York Stock Exchange. Photo / AP
Former US President Donald Trump was banned from Twitter and other top social media platforms following the January 6 Capitol riot last year that critics accused him of inciting. The ban has raised difficult questions about free speech in a social media industry dominated by a few tech giants — an issue that Trump and conservative media have seized upon.
There was broad praise for Musk from those circles on Monday.
Michael Flynn, the retired general who served briefly as Donald Trump's national security adviser, and who was suspended from Twitter in January 2021, urged Musk for changes at Twitter via Telegram, starting with reinstating banned Twitter accounts.
"Hey Elon, how about letting all of those dropped from twitter for being America First and Pro-Trump back on Twitter!!!," Flynn wrote.
Twitter earlier this year banned the personal account of far-right US Republican Marjorie Taylor Greene for multiple violations of the platform's Covid-19 misinformation policy. The Georgia Republican's account was permanently suspended under Twitter's "strike" system, which uses artificial intelligence to identify posts about the coronavirus that are misleading enough to cause harm to people. Two or three strikes earn a 12-hour account lock. Four strikes prompt a weeklong suspension. Five or more strikes can get someone permanently removed from Twitter. Twitter had previously suspended Greene's personal account for periods ranging from 12 hours to a full week.
Twitter founder Jack Dorsey with Prime Minister Jacinda Ardern at the Beehive in 2019. Photo / File
Other people banned from Twitter in recent years include Steve Bannon, for suggesting the beheading of Dr Anthony Fauci, former Ku Klux Klan leader David Duke for breaking the social media site's rules forbidding hate speech, and right-wing conspiracy theorist Alex Jones and his Infowars show for abusive behavior.
Twitter did not immediately respond to a request for comment.
The purchase also comes as Musk is locked into a bitter dispute with the SEC over his ability to post on Twitter. His lawyer has contended in court motions that the SEC is infringing on the Tesla CEO's First Amendment rights.
In October of 2018, Musk and Tesla agreed to pay US$40 million in civil fines and for Musk to have his tweets approved by a corporate lawyer after he tweeted about having the money to take Tesla private at US$420 per share.
The funding was far from secured and the electric vehicle company remains public, but Tesla's stock price jumped. The settlement specified governance changes, including Musk's ouster as board chairman, as well as pre-approval of his tweets. The SEC brought a securities fraud charge, alleging that Musk was manipulating the stock price with his posts.
Musk's lawyer is now asking a US District Court judge in Manhattan to throw out the settlement, contending that the SEC is harassing him and infringing on his First Amendment rights.
The SEC responded in a court motion, saying it has legal authority to subpoena Tesla and Musk about his tweets, and that Musk's move to throw out the settlement is not valid.
Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock.
The SEC also disclosed that it is investigating Musk's November 6, 2021 tweets that asked followers whether he should sell 10 per cent of his Tesla stake. The commission confirmed that it issued administrative subpoenas while investigating whether Musk and Tesla are complying with disclosure controls in the 2018 agreement.
Musk ended up selling more than 15 million shares worth roughly US$16.4 billion. With some sales in late December, Musk is close to selling 10 per cent.
Musk's revelation about his stake in Twitter shares comes two days after Tesla Inc. posted first-quarter delivery numbers. While the company delivered 310,000 vehicles in the period, the figure was slightly below expectations.
