Elon Musk: appears to threaten to dump stocks if Twitter refuses to sell.

You may have heard that there is a current bidding war between Elon Musk and Twitter. Musk already owns 9.2% and was recently offered a position on Twitter’s board as the 12th member, at least until Jack Dorsey leaves next month. Musk’s term on the board would last until 2024, and with the amount of shares he currently owns, Musk would be a more powerful figure than Dorsey within the company that Dorsey co-founded. To put it in comparison, Twitter co-founder and former CEO, Jack Dorsey, only owns just over 2%. After the offer was made public, on April 5th, stocks rose by 25.42%

 

However, there is a slight issue with becoming a board member at Twitter, as they are not allowed to own higher than 14.9% of Twitter’s shares, meaning Elon wouldn’t be able to tell Twitter what to do, but instead he would put forward suggestions that the other 11 board members could rule against. Due to this Elon Musk decided against joining the board, which was confirmed by Twitter CEO, Parag Agrawal, “Musk has decided not to join our board.”

 

On the 21st April, Elon Musk offered to buy Twitter at $54.20 per share, which roughly equates to $43 billion, and claims he has lined up $46.5 billion in financing if more is needed. He’s currently in negotiations with the company to buy the social media platform, claiming he wants to bring free speech to the platform we all once used to love, “I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy.”

 

In a letter sent by Musk to Twitter chairman Bret Taylor, dated April 13th, Musk states “My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder.”

 

In the letter, Musk further explains, “If the deal doesn’t work, given that I don’t have confidence in management nor do I believe I can drive the necessary change in the public market, I would need to reconsider my position as a shareholder…. This is not a threat, it’s simply not a good investment without the changes that need to be made.” 

 

If Musk were to “reconsider [his] position as a shareholder” and dump his stocks, then it would completely tank the company. When a stock declines in value by a large amount, which would be the case if Elon were to sell his 9.2% all at once, investors lose money, and the money doesn’t get redistributed to someone else, essentially, it disappears into thin air.

 

The future of Twitter depends on this sale. Long before Musk started buying shares, the stock market value of Twitter had been steadily decreasing over time. Only after he bought 9.2% of the shares and since he offered to buy out the company did stocks start to increase.

 

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