Elon Musk sued by Twitter shareholders: war is declared

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Decidedly, there have been more spectacular twists at Twitter in the past ten days than in an entire season of the Young and the Restless. The latest episode, this Tuesday, April 13, launches the response of certain shareholders of the social network against Elon Musk, the whimsical billionaire who seems determined to play the troublemakers.

One of them, Marc Bain Rasella, brought together shareholders to file a collective complaint for “fraud” with the regulator of American stock markets, the Securities Exchanges Commission (SEC). They accuse Elon Musk of having artificially kept the Twitter share price down, by not disclosing in time his rise in the capital of the social network.

Did Elon Musk knowingly forget to declare himself to take advantage of the weakness of the price of Twitter?

Indeed, from the moment Elon Musk exceeded 5% of the capital, which happened on March 14, he was legally obliged to declare this crossing of the threshold to the SEC within ten days, i.e. March 24 at the latest. But he waited to rise to 9.2% of the capital to complete the famous file, entitled “Schedule 13”. Elon Musk complied on April 4, ten days late. And during this time, the boss of Tesla and Space-X rose from 5% to 9.2% of the capital of the blue bird.

Hence the anger of shareholders, some of whom sold all or part of their shares during this period running from March 24 to April 4. Given that the announcement of Elon Musk’s rise in the capital of the company led to a strong rebound in the value of its share (+27% in one day), these shareholders believe that the “forgetting” of the billionaire prevented them from profiting from the rise in prices, and that it would have allowed the entrepreneur to continue to acquire shares at an artificially low price. However, the rise in price would certainly have been less strong with a Musk at 5% rather than 9.2%.

Ten days of great tension at Twitter

This offensive by certain shareholders – their number is not yet known – has further increased the pressure within Twitter since Elon Musk became its largest shareholder. From provocations to provocations, relations between the management of Twitter and the richest man in the world are deteriorating at high speed, to the point where one wonders if war has not finally been officially declared.

The first episode dates from Monday, April 4. That day, Elon Musk announced to everyone’s surprise that it had acquired 9.2% of the capital of the social network, for nearly 2.9 billion dollars, becoming its first shareholder. In his letter to the SEC, he specified that he had no intention to become an activist shareholder. But impossible to ignore that since January, which corresponds to the purchase of his first Twitter shares, the whimsical entrepreneur has multiplied criticism of the social network, accusing it of muzzling freedom of expression and openly criticizing its management by Parag Agrawal, the CEO since last November and the sidelining of its founder and emblematic CEO, Jack Dorsey.

The gallery then wondered:Would Elon Musk rather invest in a well-known social network, despite growth problems, and thus “influence” the direction of an established company and platform, rather than create one from scratch? “

Elon Musk did not wait very long to confirm his interventionist will. That same evening, he launched his first offensive: a poll to find out if users want to be able to edit their tweets afterwards. harmless? Not really. Because if it’s an old and popular request among Twitter users who want to be able to correct their mistakes when they write in a hurry. The former management of Jack Dorsey was fiercely opposed to it because of the potential abuses linked to online harassment or misinformation. The founder had thus declared in 2020 that the button “edit” would not see “probably never” the day.

The new management was less closed. Twitter had thus hired a project manager in 2021 to develop and test this feature, which was announced on April 1, 2022, as a joke. Subsequently, Parag Agrawal clarified that discussions in previous weeks with Elon Musk had played into this decision which could drastically change the user experience.

Board Offensive

Tuesday April 5, the day after the announcement of Elon Musk’s capital increase, Twitter offered its new first shareholder – also accused of possible price manipulation by the financial market policeman for comments made on the social network – a place on the company’s board of directors.

CEO Parag Agrawal made the announcement in a tweet: “I am thrilled to share that we are appointing Elon Musk to the board! Through conversations with Elon over the past few weeks, it had become clear that he would bring great value to our Board.” he explained. Elon Musk replied then, still in public: “I look forward to working with Parag & the Twitter Board to drive major improvements to Twitter in the coming months!”

But was it a victory for Elon Musk and a submission by Parag Agrawal, or was it a poisoned gift aimed at containing the aggressiveness of the new first shareholder? Because by accepting a position on the board of directors until 2024, Elon Musk thus prevented himself from rising to more than 14.9% of the capital of the company. He could certainly have tried to influence the company’s strategy via the board of directors – and his strike force, thanks to his 80 million followers, is real – but the majority of him would still have had to it validates his requests.

A weekend of provocative messages

For a few days, Elon Musk seemed to choose the option of putting pressure on the board of directors by “trolling” the social network massively. On Thursday, he published a “meme” featuring a famous photo where we see him holding a joint in a halo of smoke, with the caption: “Ihe next Twitter board is going to tear“. He also agreed to meet with Twitter employees for a question and answer session, as if he were the new leader of the company.

On Saturday, he went even further in the pressure. Is Twitter Dying?” he asked, illustrating his point by the fact that most of the “super accounts” of the social network – those with the most subscribers like Barack Obama, Justin Bieber, Taylor Swift, Rihanna, Lady Gaga … – post rarely content.

Even more “troll”, Elon Musk published two other tweets over the weekend, which must have stuck in Parag Agrawal’s throat. The first was a survey, with the options“yes” or “of course” to the question”Should the ‘w’ be removed from Twitter?“. In the second, he suggested to “convert Twitter headquarters in San Francisco into a shelter for the homeless“, because “no one goes there anyway” [sic].

open war

And then finally, Elon Musk has – again – changed his mind. Monday, April 11, he refused his seat on the board of directors. And not in the most elegant of ways: according to a message from CEO Parag Agrawal, richest man in the world according to Forbes simply stood up to the leaders, when he had publicly hinted that he would sit.

Elon’s appointment to the board was supposed to go into effect on April 9, but Elon told us the same day that he wouldn’t be joining.“, wrote Agrawal, before adding: Elon is our biggest shareholder and we will remain open to his ideas“. One hour after the CEO’s message, the principal concerned was content to respond by publishing the emoji “giggle“…without further comment.

From now on, place for the response of certain shareholders in court with the regulator of the financial markets. Neither Elon Musk nor Parag Agrawal reacted, the first having not posted on the social network since April 11. What will be his next move?