Elon Musk asks Twitter users if they want an edit button after disclosing he is top shareholder

Elon Musk has called out Twitter for "failing to adhere to free speech principles". PHOTO: AFP

OAKLAND, California (BLOOMBERG) - When Mr Elon Musk disclosed his stake in Twitter, 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 United States Securities and Exchange Commission (SEC), called a 13G. Those angling for board seats or seismic shakeups typically file a longer and more in-depth form, a 13D, within 10 days of buying their stake. The rule applies to anyone acquiring 5 per cent or more of a public company's stock.

Mr Musk announced his 9.2 per cent stake by filing the 13G. But the billionaire, 50, is not exactly one to stay passive.

The chief executive of Tesla and SpaceX has called out Twitter for "failing to adhere to free speech principles" and the need to root out cryptocurrency scams that are prolific on the social media platform, which was co-founded by his friend Jack Dorsey. Mr Musk is also among Twitter's most watched users, with more than 80 million followers.

On Monday (April 5), he asked them - in a Twitter poll - if they wanted an edit button, a feature that many users of the platform have long requested.

"The idea that Elon Musk falls within a passive category is probably a stretch. He's not the most passive guy," said University of Pennsylvania securities law professor Jill Fisch. "One has to ask the question: Is Elon Musk really going to be happy with a stake of this size, and remaining passive?"

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

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

With Twitter's May 25 annual meeting rapidly approaching, it is probably too late for this year if Mr Musk is aiming to push for drastic changes. But the size of his stake means he can still wield enormous sway, if he so chooses.

"He's not trying to get board seats, take over the board, or push the company to sell itself," said Mr Eleazer Klein, a 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 talk to the company, and say 'I'm concerned about crypto and as a shareholder I want you to know my views.' "

Other securities law experts said that kicking off his stake disclosure with a "passive" filing gives Mr Musk more flexibility, and keeps everyone guessing as to what his real intentions are.

"It seems that Musk is advocating for change, not control," said Mr Charles Elson, founding director of the Weinberg Centre 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 Mr Musk stays passive or switches to active, Twitter shares soared 27 per cent on Monday, a signal that shareholders welcome his investment - and his likely involvement in the company's direction.

"Regardless of whether it's a G or a D, you're going to hear a lot from him," Mr Elson said. "He's a thunder cloud walking in. He is a highly vocal, attentive and attention-seeking individual."

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