When Elon Musk disclosed his stake in Twitter Inc., he had a choice.
Shareholders who intend to remain “passive” — those who don’t seek to influence or change control of a company — file a shorter form with the U.S. Securities and Exchange Commission, 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% or more of a public company’s stock.
Musk announced his 9.2% stake by filing the 13G. But the billionaire, 50, isn’t exactly one to stay passive. The chief executive officer of Tesla Inc. 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. Musk is also among Twitter’s most watched users, with more than 80 million followers.
“The idea that Elon Musk falls within a passive category is probably a stretch. He’s not the most passive guy,” said Jill Fisch, a securities law professor at the University of Pennsylvania. “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 Inc., Meta Platforms Inc., Amazon.com Inc. and Snap Inc., the company’s founders don’t have special voting control over its future.
Fisch noted that the status of 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’re financing the purchase of the stock. Musk and Jared Birchall, the head of his family office, didn’t respond to inquiries about his intentions.
With Twitter’s May 25 annual meeting rapidly approaching, it’s probably too late for this year if 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 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 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 Charles Elson, founding director of the Weinberg Center 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 Musk stays passive or switches to active, Twitter shares soared 27% 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,” Elson said. “He’s a thunder cloud walking in. He is a highly vocal, attentive and attention-seeking individual.”