April 5, 2022
For many years it has been his favorite method of communicating with his adoring fans and for needling regulators at the Securities and Exchange Commission. So, perhaps, it was not entirely surprising to learn on April 4 that Elon Musk—one of the world’s richest men and an electric vehicle visionary—has built up a 9.2% stake in Twitter, according to filings made with the SEC on Monday, reports The Daily Beast.
The immediate impact of the news was simply to make Musk even richer, as Twitter shares jumped 26% in reaction to the news. Musk’s 73,486,938 Twitter shares were worth just under $2.9 billion on Friday, April 1’s closing price, but jumped to a $3.6 billion valuation as Musk acolytes rushed to buy positions in the stock.
Musk is now estimated to be worth around $287 billion, making him definitively much richer than the former holder of the top spot, Jeff Bezos, who languishes in second place with a mere $189 billion.
“Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle?” Musk asked his followers.
“Given that Twitter serves as the de facto public town square, failing to adhere to free speech principles fundamentally undermines democracy,” Musk added. “Is a new platform needed?”
Musk’s acquisition of a significant stake in Twitter has been revealed after many years of sometimes compulsive tweeting, during which time he has become one of the social media platform’s most followed contributors, and also been accused of using the platform to pump up his stock value.
In 2018. he famously tweeted that he was “considering taking Tesla private at $420,” adding, “Funding secured.” Musk later said he picked the number 420, code for smoking weed in marijuana culture, to amuse his then-girlfriend, the musician and singer Grimes.
Grimes may have been entertained but the SEC were not, and the tweet triggered an investigation by them, which established that not only had Musk not secured funding for the proposed transaction but that “he allegedly knew that the potential transaction was uncertain and subject to numerous contingencies.”
The SEC said: “According to Musk, he calculated the $420 price per share based on a 20% premium over that day’s closing share price because he thought 20% was a ‘standard premium’ in going-private transactions.
“This calculation resulted in a price of $419, and Musk stated that he rounded the price up to $420 because he had recently learned about the number’s significance in marijuana culture and thought his girlfriend ‘would find it funny, which admittedly is not a great reason to pick a price’.”
The agency eventually settled with Musk, and he was ordered to pay $20 million and step down as chairman of Tesla. Tesla had to pay another $20 million. Musk also had to agree that he would not tweet without pre-approval from a company attorney. The billionaire has subsequently sought to challenge that settlement, saying the SEC has used the court agreement “to trample on Mr. Musk’s First Amendment rights and to impose prior restraints on his speech.”
The SEC disclosed recently that it is once again investigating Musk over a tweet. This time, the offending message was a November 2021 post in which he asked his 80 million followers if he should sell 10% of his stake in Tesla.
The SEC is seeking to establish if Musk obtained the necessary approval from company lawyers before posting the message.
Musk is also reportedly being investigated to see if he tipped his brother off about the poll.
Research contact: @thedailiybeast