On April 4th, Elon Musk bought a 9% stake in Twitter, which made him the largest shareholder of the company at the time. This made it so that Musk owned more stake in Twitter than its founder, Jack Dorsey. As a surprise to many, Elon Musk refused to join Twitter’s board of directors; this was actually a strategic decision that allowed him to take over the entire company.

What does this mean?

Elon Musk’s purchase of Twitter stock meant that he owned 9% of the company’s value. Elon Musk, who has been an avid Twitter user for years, provided himself with a great amount of influence within the company, yet he decided not to join Twitter’s board of directors. This is because joining Twitter’s board of directors would cap Musk’s potential ownership of the company at 15%. Refusing to join the board sent a powerful message to the company along with all of its investors. Elon Musk confirmed that he wanted to take over the social media platform.

Elon Musk’s Struggle to Take Over Twitter

Elon Musk offered to buy every share of Twitter for $54.20 per share on April 14, but this scenario seemed unlikely to occur. First, soon after Musk became Twitter’s largest shareholder, The Vanguard Group purchased an even larger stake in Twitter. In addition to Vanguard’s Twitter purchase, Twitter’s board was originally against Elon Musk’s offer, and they announced the use of the “poison pill” on April 15, a tactic that would make it very difficult for Musk to purchase Twitter.

The Poison Pill

The poison pill allows shareholders to buy a corporation’s stock at a discounted price if a shareholder purchases a large stake, a method of defending an individual shareholder from owning too much of a company. In the case of Twitter, if a shareholder such as Elon Musk takes a 14.9% ownership stake in Twitter, the other shareholders have an option to buy more shares at a lower price. This would have made it difficult for Elon Musk to afford the remaining Twitter shares to become its full owner. 

How Elon Musk Still Bought Twitter

As part of Twitter’s shareholder rights plan (the poison pill), the board could still allow an individual shareholder to make an offer to buy the company if they deem the offer beneficial. On April 24, it was announced that Twitter would seriously consider Elon Musk’s offer to take over Twitter, and the company will evaluate Twitter’s value. The next day, Twitter approved Musk’s purchasing offer, so he will own the entirety of the social media platform. The deal is expected to close later this year.

Musk’s Goal

Musk announced that he would ease Twitter’s speech restrictions, which would result in a variety of different opinions expressed on the platform; many conservatives have pointed out that large social media companies such as Facebook and Twitter have silenced right-wing figures, most notably Donald Trump (who has said he will not return to using Twitter). While this could be seen as a victory for free speech, this may also mean that dangerous misinformation could be spread. Elon Musk hopes to deregulate Twitter’s speech constraints, and while that could improve society, it could also have negative effects.