In the news of Elon Musk taking a major stake in Twitter – and the revelation that he is really working on an edit button for tweets – many people have noticed a wrinkle that seemed small at first but could cause problems later.
On Monday, Musk filed beneficial ownership reporting documents with the Securities and Exchange Commission (SEC) noting his ownership of 73,486,938 shares of Twitter (about 9.2% of his outstanding common stock and enough to make of him the company’s largest individual shareholder), and the checkbox on the form (pdf) indicated that it was a Schedule 13G, which allows simple disclosure for investors who intend to remain “passive” in the affairs of the company.
We don’t usually go into the specifics of the stock market, but it’s important because of what happened next. This morning, Twitter and its CEO, Parag Agrawal, announced that Elon Musk is becoming a member of the board, and this news has raised eyebrows as it suggests a much more active role, which requires filing a Section 13D form. more detail on the purchase of shares.
Not having the right disclosure could result in a fine from the SEC, and as much as Elon seems to enjoy his ongoing clashes with the federal agency (alleging broken promises, accusing the agency of leaks, claiming he was forced into an unfair settlement over his tweets and quoting Eminem in a court filing are just a few), it appears to be the one he decided to avoid. Around the same time news about the edit button broke, an updated folder appeared, modifying the previous one, ticking the right box and seemingly saving an unnecessary headache for the billionaire and his new toy at 9.2%.
Most notably, the new form includes language relating to Musk’s plans for his stake in the company and the company as a whole. He’s referring to the agreement that he’s not trying to own more than 14.9% of Twitter stock as a condition of joining the board and that other than potentially selling or buying stock, he doesn’t does not intend to try to sell the company or its subsidiaries, propose a merger or take any other action indicated under point 4 of the form. A report of The New York Times says that unlike some other board members, Musk did not sign an agreement promising not to influence company policies.
The new file also contains a lot more detail than Monday’s form about how we got here. This 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, peaked at 4,839,507 bought on February 7, and the last noted lot was bought on April 1. On April 4, Twitter announced its new role, and a day later we got the news of the edit button (which Twitter says has been in the works for over a year and has nothing to do with a poll released by its newest board member. ).