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Elon Musk is now the largest Twitter shareholder and faces a showdown

His stake sets up a confrontation with advocates for restricting harmful accounts

Tesla CEO Elon Musk, seen in March 2020, has taken a 9.2 percent stake in Twitter, according to a regulatory filing on Monday. (Susan Walsh/AP)
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SAN FRANCISCO — Elon Musk became the largest shareholder of Twitter on Monday, setting the platform up for a potential political showdown over its efforts to limit harmful content, efforts the firebrand Tesla chief executive has indicated that he sees hastening a turn toward censorship.

His surprise investment, which comes days after questioning the company’s commitment to free speech and suggesting he might start his own social platform, sent Twitter stock soaring. While it was not immediately clear what role Musk plans to play, analysts speculated he may try for an activist restructuring that could change the way Twitter polices its platform as well as who it banishes.

Some inside Twitter worry Musk may push Twitter in a libertarian direction, away from blocking or restricting accounts that cause social harm, according to people familiar with internal conversations who spoke on the condition of anonymity to describe sensitive matters.

Just days after Twitter banned former president Donald Trump in the wake of the Capitol insurrection, Musk wrote on Twitter that “a lot of people are going to be super unhappy with West Coast high tech as the de facto arbiter of free speech.”

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Some Twitter employees and experts fear Musk’s involvement could also push the company further into chaos after years of investor activism and the sudden departure of former chief executive Jack Dorsey. The company is already at a critical juncture ahead of the 2022 midterm elections that will determine control of Congress, when it will have to police related misinformation that could help sway votes.

Musk has a 9.2 percent stake in the social media company, which was disclosed in a Securities and Exchange Commission filing and sent shares up 27 percent. His stake, worth nearly $2.9 billion based on the closing price of Twitter on Monday, now dwarfs that of Dorsey, who owns a 2.3 percent stake.

Musk tweeted, “Oh hi lol,” greeting users of the social media app where he makes many of his most erratic pronouncements, including news about Tesla, where he heads the company. Musk seemed to realize the potential of his influence almost immediately. By Monday evening, he launched an online poll on Twitter asking users whether they would like an edit button, a bone of contention among users and the app’s leadership.

Tesla did not respond to a request for comment. The company does not typically respond to media requests after disbanding its public relations team in 2020. Twitter declined to answer questions about Musk. He did not respond to a request for comment.

Dan Ives, managing director at Wedbush Securities, said Musk’s passive stake could be just the beginning. Rather than starting a competing social media platform, as some predicted, “It looks like Elon has his eyes laser set on Twitter.” Ives estimates Musk, the world’s richest man, will eventually pursue an active stake and take a more aggressive role.

Musk polled Twitter last month on whether the app adheres to free speech, remarking the poll’s consequences will be “important.” Musk questioned whether Twitter “rigorously adheres” to the principles of free speech.

“Given that Twitter serves as the de facto public town square, failing to adhere to free speech principles fundamentally undermines democracy,” he tweeted. He then asked, “Is a new platform needed?”

The filing reporting Musk’s stake is dated March 14, though his signature on the document is dated Monday. That means Musk would have acquired his ownership stake before his poll.

“He’s kind of coming in friendly right now,” said Gene Munster, managing partner of former Tesla investor Loup Ventures. “He’s the most famous person in the world and he has pretty loyal fans. There’s some unique things that only he can do as a shareholder-activist.”

Musk sold billions worth of Tesla shares last year, making some of his wealth liquid for the first time. Musk sold the shares after taking to Twitter to poll his users on whether he should sell 10 percent of his shares, though a trading plan that would have seen him sell much of the stock had been adopted weeks earlier, putting the purpose of the poll into question.

Musk’s views on free speech have the support of many conservatives and Trump fans, some of whom praised his new investment on Monday. “Now that @elonmusk is Twitter’s largest shareholder, he should demand the end of political censorship, company-wide reform, and the reinstatement of President Trump,” tweeted Monica Crowley, former assistant secretary of public affairs at the Treasury Department under Trump.

Both Musk and Dorsey have been known as chaotic but visionary Silicon Valley founders, and the two men appear to be on friendly terms. They’ve praised one another on Twitter and share a common love of cryptocurrency.

On internal Twitter message boards, some employees decried Musk as unstable, referencing his tweets and his conflicts with the Securities and Exchange Commission. Some discussed organizing a protest, according to documents obtained by The Washington Post.

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It would not the first time Twitter will have faced criticism from activist shareholders, if Musk takes that tactic. Previously, Elliott Management, an investment firm that acquired a large stake in Twitter, started a campaign to oust Dorsey in 2020. Musk tweeted his support for Dorsey at the time.

They criticized Dorsey’s role running payments platform Square while also running Twitter, saying he was an absent manager and that Twitter was undisciplined and slow to innovate. Though Elliott did not win in its 2020 campaign to oust Dorsey, his surprise announcement that he was stepping down last December was viewed as a win.

Musk is very active on Twitter, having tweeted more than 17,300 times. He averages 125,180 likes per tweet, according to Socialtracker. He has tweeted some controversial posts, including one in 2018 in which he said he had “funding secured” to take Tesla private at $420 a share. Later, Musk clarified that the tweet had been a joke.

He said he chose the number $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,” according to the federal complaint.

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The joke nonetheless caused Tesla shares to skyrocket, and Musk and Tesla were each fined $20 million. Musk additionally had to step down as Tesla board chairman and agreed to have his communications vetted by an approved securities lawyer.

Musk recently accused the Securities and Exchange Commission of trying to “chill his exercise of First Amendment rights” while asking a judge to throw out a 2018 settlement agreement governing his tweets, alleging he felt boxed in by multiple sources of pressure at the time and he entered into it to protect Tesla shareholders.

“Tesla was a less mature company” and the Securities and Exchange Commission action “stood to jeopardize the company’s financing,” Musk said in a legal filing. Defending against the action “through protracted litigation was not in the interests of the company and its shareholders,” he added.

At the time, Musk said the $20 million weed joke was “worth it.” Back then, he had 22 million followers, a fraction of what he has on Twitter today.