Tesla boss Elon Musk revealed a 9.2 per cent stake in Twitter Inc. on Monday, prompting a massive run up in shares of the company that he may now be the largest owner of.
The disclosure comes close on the heels of his tweet that he was giving a "serious thought" to building a new social media platform, while questioning Twitter's commitment to free speech.
A filing showed that Musk owns 73.5 million Twitter shares, which were worth roughly $2.9 billion US based on the $39.31 share price when the stock market closed on Friday.
On Monday morning, the price of Twitter shares rocketed up on the news to more than $48, pushing Musk's stake up in the process.
A prolific Twitter user, Musk has over 80 million followers since joining the site in 2009, and has used the platform to make several announcements, including teasing that he was going to take Tesla private at $420 a share.
No such deal was in the works, which is why securities regulators have tried to crack down on the billionaire ever since. In October of 2018, Musk and Tesla agreed to pay $40 million in civil fines and for Musk to have his tweets approved by a corporate lawyer because of that saga.
But his lawyers are now fighting to have that deal torn up.
Last month, Musk asked U.S. District Court Judge Alison Nathan to nullify the settlement agreement. His lawyer, Alex Spiro, said the SEC has used the court agreement "to trample on Mr. Musk's First Amendment rights and to impose prior restraints on his speech."
As part of that court battle, the SEC has revealed it is also probing a Musk tweet from last November in which he asked his followers if he should sell 10 per cent of his Tesla stock to pay his taxes.
Questions about Twitter's future
Musk's minority stake in Twitter is already raising questions about whether he will buy more of the company, or push for changes.
"We would expect this passive stake as just the start of broader conversations with the Twitter board/management that could ultimately lead to an active stake and a potential more aggressive ownership role of Twitter," Wedbush analyst Dan Ives wrote in a note.
While news of the deal sent the value of the company skyward, some analysts say the move could be more trouble than it's worth for Twitter.
The company was targeted by activist shareholders Elliot Management Corp. last year because they didn't like that Jack Dorsey was CEO of Twitter but also of payment firm Square. The shareholders argued that one person couldn't fully do both jobs at once, and that Twitter was suffering because of it.
Elliot Management seemingly won that fight when Dorsey resigned as CEO of Twitter last year.
News that Musk is now taking a stake in the company could bring similar headaches, especially if he tries to buy the whole company, or push for changes there.
"Though we don't expect the company to be taken private in the near term, this could present a challenge for new CEO Parag Agrawal, who has focused on new products to aid monetization," Bloomberg Intelligence analyst Mandeep Singh said.
"Musk's suggestions could be at odds with activists Elliott and Silver Lake, which are more focused on improving operations and free cash flow."
