Musk’s ‘passive’ Twitter participation begins with a poll on…

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When Elon Musk revealed his stake in Twitter Inc., he had a choice. Shareholders who intend to remain “passive” — those who do not seek to influence or change control of a company — file a shorter form with the U.S. Securities and Exchange Commission called 13G. Those seeking board seats or seismic upheavals typically file a longer, more in-depth form, a 13D, within 10 days of purchasing their stake. The rule applies to anyone acquiring 5% or more of the shares of a public company. Musk announced his 9.2% stake by filing the 13G. But the billionaire, 50, is not really one to remain passive. The CEO of Tesla Inc. and SpaceX called out Twitter to “not respecting the principles of freedom of expression” and the need to stamp out the cryptocurrency scams that are prolific on the social media platform, which was co-founded by his friend Jack Dorsey. Musk is also among Twitter’s most-watched users, with over 80 million followers. Late Monday, he asked them — in a Twitter poll — if they wanted an edit button, a feature that many platform users have long requested.

“The idea that Elon Musk falls into a passive category is probably overblown. He’s not the most passive guy,” said Jill Fisch, a securities law professor at the University of Pennsylvania. You have to ask yourself the question: is Elon Musk really going to be satisfied with a participation of this size, and remain passive?

Twitter is particularly vulnerable to outside pressure because unlike Alphabet Inc., Meta Platforms Inc., Amazon.com Inc. and Snap Inc., the company’s founders don’t have special voting control over its future.

Fisch noted that the status of Musk’s stake could change — technically, investors can file a 13G and then change their mind. A 13D requires more disclosure – shareholders must say what their plans are and how they are financing the purchase of the shares. Musk and Jared Birchall, the head of his family office, did not respond to inquiries about his intentions. The SEC filing shows that the date of the event that triggered the disclosure was March 14.

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With Twitter’s May 25 annual meeting fast approaching, it’s probably too late for this year if Musk aims to push for drastic changes. But the size of his stake means he can still wield enormous influence, if he chooses.

“He’s not trying to get board seats, take over the board or push the company to sell itself,” said Eleazer Klein, partner at law firm Schulte Roth & Zabel. . “He’s not trying to be an activist shareholder. But you can be influential without being an activist. He can certainly speak to the company and say, “I’m concerned about crypto and as a shareholder, I want you to know my perspective.”

Other securities law experts have said launching his stake disclosure with a “passive” filing gives Musk more flexibility and leaves anyone guessing what his true intentions are.

“It seems Musk is about change, not control,” said Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware. “But it’s going to be a mess for Twitter, because Elon Musk is not your ordinary shareholder.”

Whether Musk stays passive or goes active, Twitter shares soared 27% on Monday, a signal that shareholders welcome his investment — and his likely involvement in running the company.

“It doesn’t matter if it’s a G or a D, you’re going to hear a lot about him,” Elson said. “He’s a storm cloud coming in. He’s a very vocal, attentive and attention-seeking person.”

(Updates with Musk’s Twitter poll on the edit button in the third paragraph.)

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