Kasturi’s joining the Twitter team raises questions about the company’s plans

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Elon Musk joined his group on Twitter on Tuesday. The day before, Tesla’s CEO and the world’s richest man revealed that he is the largest shareholder in the social media company.

Beyond turning into the latest silicon fence drama, investors are trying to figure out what Twitter means.

Twitter’s stock rose 4% on Tuesday following the board’s announcement. Monday, its best day since the company’s IPO in 2013, jumped more than 27%. But when it comes to musk, markets are rarely rational.

“It’s a pleasure for a company to report a profit – it’s very good for a company to report a relationship with Elon Musk, ” said Howard Fischer, a former lawyer with the Securities and Exchange Commission, a partner in Moses & Singer’s law firm in New York. . “[Musk] He may not improve operations, he may not improve earnings, he may not reduce liabilities, but the stock market rewards [Twitter]. ”

Whatever the financial impact, one thing is clear: overnight, Musk has more power over a company that is routinely criticized, and he tweets to 80 million followers. Of Elon.

The purpose of the musk on Twitter is not clear, it is probably by design.

He has previously called for Twitter’s content-evaluation policies, saying the company has failed to uphold free speech policies. Tesla CEO Create an Edit Button on Twitter (a common complaint on TwitterSphere) and allow users to have more control over the tweets they view in their news feed.

“My suspicion is that he’s starting relatively slowly, but he’s willing to make some drastic changes, and perhaps more in the direction of free speech,” said Youssef Schwali, a analyst at Troost Securities, which recommends buying shares in Twitter. “I do not think he will ultimately care about things like user development.”

Twitter CEO Barack Agarwal and co-founder Jack Dorsey welcomed Musk to the company’s team.

“He is an ardent believer and an ardent critic of the service, which should strengthen us in the long run, both on Twitter and on the boardroom,” Agarwal tweeted. “Welcome Elon!”

Musk disclosed ownership of his Twitter shares in a 13G form with the SEC. This means a passive interest, which means the holder is not trying to control or influence the company.

But that may change. In the future, Musk may continue to play an active and more aggressive role in the company. If he does so, he must disclose it to the SEC in 13D format. If so, he should express his intent.

Tom Hayes, chairman of Great Hill Capital, said: “The stock will be active at any time. I think Twitter is active by putting him on board before he demands it.”

The social media company set some parameters for Muskin’s appointment to the board, which limits his influence. The lawsuit alleges that Musk could not hold a 14.9% stake in Twitter, either individually or as a member of the group, until 90 days after joining the Twitter team. Musk will serve as second-class director until 2024.

“I think they set that condition because they don’t like it [Musk] Should have unrestricted control over the company, “Hayes said.

Twitter is not new to aspiring investors. In 2020, the company entered into an agreement with Elliott Management following the expulsion of Dorsey, the former CEO of Hedge Finance. The deal includes a $ 1 billion investment by private equity firm Silver Lake.

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Wall Street analysts are already beginning to speculate on what Musk may have stored on Twitter. More aggressive stock buying? More board seats? What about the full purchase?

“Use your imagination,” Gordon Hasket analyst Dan Pilson wrote in a note to clients Monday. It remains to be seen whether Dorsey will like the idea of ​​Musk buying Twitter as Jeff Bezos bought the Washington Post, “he said.

Hayes said he thinks Musk is unlikely to pursue something as dramatic as the shake-up or personal acquisition.

“He now has a material finance stake in the company,” Hayes said, adding that Twitter had no reason to want to acquire Musk “until his ideas are implemented”.

Musk may be even more agitated to change company policies. Last month, he told his Twitter followers whether the company “strictly adheres to freedom of speech.”

“As the Twitter practice operates as a public city square, failure to adhere to free speech policies fundamentally undermines democracy,” he tweeted. “What to do?”

Musk, known for attacking journalists and others who criticize him and his organization, has a vague definition of freedom of speech. After the 2018 tweet, he accused the SEC of harassing him in a calculated attempt to “cool down” his right to free speech in overseeing his communications with shareholders, claiming he had financed the company’s takeover.

Scully said that if Musk were true to his word about freedom of speech, any drastic changes in his image on Twitter would become a highly controversial site. The controversy will attract consumers but will drive away advertisers, the board said, cautiously.

Twitter suggested that Musk and other members of its board had no authority to set company policies. “Our policy decisions are not determined by the board or stakeholders,” a Twitter spokesman told CNBC in a statement.

The company’s team plays a key role in providing guidance and feedback “across our service,” but the day-to-day operations and decisions are made by Twitter brass and staff, a spokesman said.

It is also unclear how Musk will be on board. In addition to leading Tesla, Musk is also the CEO of Rocket Company SpaceX and Neuralink, which aims to develop compatible brain chips.

Fischer, a former lawyer for the SEC, said the Twitter administration should be concerned about Musk’s incurring the wrath of the financial regulator. While rejecting some SEC rules, Musk has a history of controversy by advertising his companies on Twitter.

“If I were on Twitter, I’m worried he’s getting the SEC’s attention,” Fischer said.

Musk did not immediately respond to a request for comment from CNBC.

See: Jim Kramer says Elon Musk is a ‘Trojan horse’ on Twitter

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