In the news that Elon Musk is taking a significant ownership stake in Twitter — and the revelation that it’s actually working on an edit button for tweets — many people noticed a wrinkle that seemed small at first, but could cause problems later.
On Monday, Musk filed the beneficial ownership report paperwork with the Securities and Exchange Commission (SEC) to establish his ownership of 73,486,938 shares of Twitter (about 9.2 percent of the outstanding common stock and enough to make him the largest individual shareholder of the company), and the box checked on the form (pdf) indicated it was a Schedule 13G, which allows easy disclosure for investors who intend to remain “passive” in the company’s affairs.
Normally we don’t go into the details of the fair, but this is important because of what happened next. This morning, Twitter and its CEO, Parag Agrawal, announced that Elon Musk will become a board member, and that news raised eyebrows as it suggests a much more active role, requiring a more detailed Section 13D form on the stock purchase to be submitted.
Failure to provide proper disclosure could result in a fine from the SEC, and as much as Elon seems to enjoy his ongoing clashes with the federal agency (claiming broken promises, accusing the agency of leaking, alleging he was coerced into an unjust settlement of his tweets and citing Eminem in a lawsuit are just a few), seems like this is one he’s decided to avoid. About the same time, news broke about the edit button, an updated file appeared, change the previous one, tick the right box, and avoid seemingly unnecessary headaches for the billionaire and his new 9.2 percent toy.
Most notably, the new form contains language related to Musk’s plans for his stake in the company and the company in general. It refers to the agreement that he will not seek to own more than 14.9 percent of Twitter’s stock as a condition of joining the board of directors and that, other than potentially selling or buying shares, he has no plans to attempt to sell the company or its subsidiaries. propose a merger or take other actions mentioned under item 4 on the form† A report from The New York Times notes that, unlike some other board members, Musk has not signed an agreement promising not to influence company policies.
The new application also contains significantly more detail than Monday’s form about how we got here. It indicates that Musk has been buying Twitter shares almost daily since January 31. He never bought less than 371,075 shares on the days he acquired them, peaking at 4,839,507 bought on February 7, and the last listed lot was bought on April 1. On April 4, Twitter announced its new role and a day later, we heard the news about the edit button (which Twitter says has been in the works for over a year and has nothing to do with a poll posted by the latest board member ).