Twitter Inc. shares looked poised to continue their rally Tuesday after the company named Tesla Inc. chief Elon Musk to its board of directors.
announced Tuesday morning that Musk has been named a board director with a term that will expire in 2024. The announcement comes a day after disclosures revealed that Musk had taken a 9.2% stake in Twitter, making him the largest holder of Twitter’s common stock.
Shares of Twitter were up 3.3% in morning trading Tuesday, after they surged 27.1% in Monday’s session. The performance Monday made for Twitter’s best single-day percentage gain on record.
Twitter noted that as part of Musk’s board involvement, he “will not, either alone or as a member of a group, become the beneficial owner of more than 14.9% of the company’s common stock outstanding,” according to a filing with the Securities and Exchange Commission. That condition applies for as long as he is on the board, and for 90 days after that.
In a preliminary proxy filing Friday, Twitter mentioned that its stock-ownership guidelines require that non-employee directors own “a number of shares of Twitter stock equal to a value of two times the annual cash board retainer of the prior year.” The preliminary proxy didn’t mention a policy of ownership caps for those who were Twitter directors at the time of the filing.
In Tuesday’s filing, Twitter added that “there are no arrangements or understandings between Mr. Musk, on the one hand, and the company or any other persons, on the other hand, pursuant to which Mr. Musk was selected as a director.”
Though Twitter cofounder Jack Dorsey stepped down as CEO late last year and plans to leave Twitter’s board of directors this year, he welcomed Musk’s board involvement.
Following the announcement of Musk’s Twitter stake Monday, some analysts speculated that the Tesla
executive was interested in bringing about changes to Twitter’s platform. He has criticized the company’s moderation policies in the past, and back in March he posted a Twitter poll asking whether followers thought that Twitter “rigorously adheres” to free speech, adding that “the consequences of this poll will be important.”
“While it remains unclear, it is possible that Musk may have been motivated by the fact that 70% of his 2M+ poll respondents said that they didn’t think TWTR rigorously defended free speech,” Jefferies analyst Brent Thill wrote in a note to clients late Monday.
Bernstein’s Mark Shmulik added that Musk’s interest in Twitter seemed to be “mainly personal,” noting that “there’s no sign that he has particularly commercial intent for Twitter.”
Musk appeared to tease his potential to drive changes at Twitter in a Monday night tweet, in which he posted another poll. This time he asked whether users wanted an edit button on Twitter. The company has long held off on introducing this much-requested feature.
Twitter’s stock has run up 19.5% year to date, while Tesla shares have gained 6.2% and the S&P 500 index
has slipped 4.4%.