Last week, the CEO of Twitter (NYSE: TWTR), Parag Agrawal, invited Elon Musk to the board of directors, leading to a 3% rise in the company’s share price. However, on Sunday Tesla’s CEO decided to not take that position, leaving everyone in the market puzzled about his decision.
For unknown reasons over the weekend, Elon Musk decided to not take a seat on Twitter’s board, a decision that left many stakeholders and investors confused about his motives. Holding a seat on the board means that he would operate on behalf of the company’s financial interests. But now, with Musk holding a 9.2% stake, becoming the largest individual shareholder in the company, he acquired the power to be an activist investor, directly influencing how the social media platform operates.
Formally, because his stake in Twitter is less than 20%, he is considered a passive investor but because he is constantly sharing his opinion about how Twitter should operate that alone characterizes him as an activist investor. Twitter has been one of the main platforms Elon Musk has used to express his opinion, with more than 80 million followers, and what he says has a great impact on the company. However, this new activist position has heaped anxiety on Twitter employees, due to his power to push the social platform in the direction he wants.
However, the story does not end here, additional drama was added to Twitter and Musk’s story when investors decide to sue Elon Musk for not disclosing his investments in the company at the proper time. Shareholders claimed that they missed out on the rise in Twitter’s stock price because Musk waited to disclose his 9.2% stake. After the disclosure, the company’s share rose 27% from $39.31 to $49.97.
According to Marc Rasella, former shareholders representative, because Musk delayed disclosing his stake, he was able to buy Twitter shares “at lower prices while defrauding them into selling at “artificially deflated” prices. The former shareholders are seeking punitive and compensatory measures. Elon Musk’s lawyers had no comments and the case Rasella v Musk was filed in New York this week.