Musk’s investment may invite problems with the SEC.
Earlier this week, Tesla and SpaceX CEO Elon Musk made the surprising announcement that he had purchased a controlling stake in his favorite social media platform, Twitter. This led to speculation about how he, as a prominent investor in the company, would influence its corporate direction. As it turns out, he’s not going to be a prominent investor. He’s going to work for the company.
Twitter CEO Parag Agrawal announced yesterday that Musk is being appointed to the Twitter board of directors in the near future.
“Through conversations with Elon in recent weeks, it became clear to us that he would bring great value to our Board,” CEO Parag Agrawal said in a tweet.
“He’s both a passionate believer and intense critic of the service which is exactly what we need on Twitter, and in the boardroom, to make us stronger in the long-term,” Agrawal added.
“Looking forward to working with Parag & Twitter board to make significant improvements to Twitter in coming months!” Musk responded.
Elon Musk bought Twitter shares in every available trading session from Jan. 31 to April 1. Total daily shares purchased ranging from 371,075 to more than 4.8 million, new filing shows.https://t.co/UOREQI8rfF
— MarketWatch (@MarketWatch) April 6, 2022
While this could be a very big appointment for Musk, there’s a bit of a problem: when he bought his stake in the company, he only filed to be a passive investor, with no plans to directly influence its dealings on the corporate level. This filing concern could invite intense scrutiny from the US Securities and Exchange Commission.
“[Musk] being a nominee for director is not a passive investor,” former SEC enforcement attorney Marc Steinberg told Fox Business. “I think it’s pretty much a consensus in the viewpoint that a director has the ability to impact the policies and practices of the organization, and that person is not a passive investor.”