Elon Musk Resigns from the Twitter Board of Directors in a Dramatic U-turn

Musk requested a board position on Twitter weeks before the social media firm agreed to the arrangement, sources told Reuters at the time.

Musk and Twitter made no mention of the reversal. Musk said in a regulatory filing on Monday that he now has the option of increasing his 9.1 percent interest in Twitter or pressuring the firm to pursue deals, despite the fact that he currently has no such intentions.

There was no indication that Twitter was concerned about a hostile proposal from Musk. Twitter made no mention of a shareholder rights plan, dubbed a "poison pill," that would require dilution if Musk attempted to increase his ownership over a particular level.

However, Twitter CEO Parag Agrawal cautioned staff on Sunday about "distractions coming," an apparent allusion to Musk's criticism of the firm through Twitter. He continued by saying he felt Musk's exit was "for the best."

A representative for Twitter did not reply to a request for comment.

Twitter's stock was up 2.6 percent to $47.48 in New York afternoon trade on Monday. They have increased by more than 20% after Musk announced his Twitter ownership on April 4. According to Wall Street experts, Musk's engagement drew tens of thousands of ordinary investors to the stock.

Securities experts have noted that by delaying and mischaracterizing the announcement of his Twitter investment, Musk was able to purchase the shares at a discount, saving him an estimated $143 million. It is unknown if Musk, whose Forbes-estimated net wealth is $274 billion, would contemplate this.

Musk was unavailable for comment.

Musk removed a large number of tweets he sent over the weekend against the social media network on Monday. It was not immediately obvious what precipitated the move. The tweets varied from a plea to ban advertising from Twitter to a suggestion that the social media business omit the letter "w" from its name.

Jacob Frenkel, a former SEC enforcement attorney, said Musk's turnaround was unusual but did not seem to break any regulations.

"Merely being presented with an invitation to join the offer to board, considering it, and declining is not a breach of securities regulations," Frenkel said.

The SEC's spokeswoman refused to comment.

Others noted that Musk's public criticism of Twitter would have been difficult to reconcile with his fiduciary responsibilities as a board member.

"Once on the board of directors, the majority of individuals, even activist shareholders, generally refrain from speaking publicly," Gregory Taxin, managing director of activist investor advice company Spotlight Advisors, said.

'FINANCES SECURED'

This is hardly Musk's first high-profile U-turn. He tweeted in 2018 that he had "got finance" for a $72-billion plan to take Tesla (NASDAQ:TSLA) private, but did not proceed with the offer.

Musk and Tesla each paid $20 million in civil penalties, and Musk resigned as chairman of Tesla to address SEC allegations that Musk deceived investors. Musk has subsequently contested an arrangement he made with the SEC to have some of his tweets evaluated by a lawyer.

Securities professionals have also raised concerns about Musk's compliance with the terms of his settlement with the SEC. Musk said on Twitter in early November that he would sell 10% of his Tesla shareholding if people agreed. A majority agreed, and the vote sent Tesla stock plunging. Since then, Musk has sold $16.4 billion worth of Tesla shares.

Following Musk's appointment to the board of directors last week, several Twitter workers expressed concern about the social media platform's capacity to filter material, according to company sources.

According to Charles Elson, founding director of the Weinberg Center for Corporate Governance, Musk was already very busy with Tesla, an electric vehicle manufacturer, and SpaceX, a space rocket company, and he would have had little time to contribute substantially to Twitter as a board director.

"Tesla's shareholders should be very worried about his engagement here because it diverts time and attention away from Tesla's principal endeavor," Elson added.

Tesla's public relations department did not reply to a request for comment.