Background information
Elon Musk is an entrepreneur, investor and technology visionary best known for launching SpaceX, Tesla and SolarCity. Musk is one of the most influential people on social media, especially on Twitter. His tweets often move markets and invigorate debate, but until recently, it was unclear just how much of Twitter Musk actually owned.
Percentage Owned by Elon Musk
According to Twitter’s fourth quarter report in 2019, Elon Musk owned a total of 8.27 million shares of Twitter, equating to a 4.2 percent stake in the company. While this doesn’t seem like much, Musk is now one of the largest individual stakeholders, behind venture capitalist Chris Sacca, who owns a 7.0 percent stake, and Square and Twitter CEO, Jack Dorsey, who holds a 6.9 percent stake in Twitter.
Musk’s stake in Twitter has been influential in the company’s strategy. In 2018, Musk spearheaded a buy-back program that saw Twitter purchase $1 billion worth of its shares, likely hoping to reduce their overall stake and increase their value in the process. This followed months of criticism aimed at Musk, who had become notorious for his erratic tweeting behaviour.
Musk’s Controversial Tweeting Behaviour
Musk has gained considerable press for his tweeting habits. In 2019, he tweeted that Tesla’s stock was ‘too high’, leading to a 6.3 percent drop in its share price. Similarly, in 2020, Musk criticized California’s closure of Tesla’s car plant due to the Covid-19 outbreak, leading to an almost immediate 5.8 percent slump in the company’s share prices.
Financial Implications
This drop in Twitter’s share value due to Musk’s tweets has financial implications for his stake in the company. If the stock remains at this lower price, it could affect Musk’s decision to continue investing in Twitter beyond his current holdings. The Securities and Exchange Commission (SEC) has already filed lawsuits against Musk for alleged breach of Twitter’s securities trading laws, and if this persists, additional sanctions could be put against him.
Advantages for Twitter
Despite the potential risks posed to Musk, his stake in Twitter brings several advantages to the company. Through his influence and the attention he garners, he helps ensure user-growth on the platform and encourages maximal usage through his constant tweets. This notoriety keeps Twitter active in the news, bringing attention to the company in a way few other individuals can.
Building a Corpus of Data
Musk’s stake in Twitter also provides valuable data to the company. Not only do they gain access to Musk’s tweets and the retweets of his followers, but they can create a massive corpus of data, derived from the conversations he generates. This data can be used to target and develop new products, test algorithm changes and inform further research.
Benefits for Elon Musk
The benefits for Elon Musk are reciprocal; not only does he have a direct influence on the company and access to invaluable data, but he also benefits financially from increases in Twitter share prices. This can be seen in his 2020 net worth, which grew by upwards of $25 billion when Twitter’s share price reached an all-time high.
Failed Twitter Bids
In 2016, Musk made an unsuccessful bid to purchase Twitter and merge it with SpaceX and Tesla. This would have been the largest tech acquisition of all time, but due to alleged contract breaches with SpaceX, the acquisition was blocked. Some speculated that if the acquisition had gone ahead, Musk’s stake in Twitter would have been even larger.
Third Party Investments
Musk’s investments in Twitter are not limited to his own stake. He has invested in a third party investment fund which holds a total of 5.5 million Twitter shares, worth a combined value of around $700 million. While this does not represent a direct stake for Musk, it is enough to be one of the largest investors in Twitter.
Position of Power in Twitter
All of these investments, combined with Musk’s reputation on social media, puts him in a powerful position within Twitter. Not only can he access valuable data and influence the platform, but his presence also wards off potential competitors, especially those who may be interested in buying out Twitter.
Investment Prospects
Despite all of this, many financial investment groups are still looking to invest in Twitter, with expectations that the company’s share price can only continue increasing in the near future. This would bring further prosperity to both Twitter and Musk’s stake in the company, who have increasingly become intertwined.
Expert Perspectives
Experts in finance and tech have a mixed reaction to Musk’s stake in Twitter. Many proponents of companies like Tesla and SpaceX point out that his investments in Twitter prove that Musk is willing to put his money where his mouth is, and back up his claims to energize markets for his other companies as well.
However, others are more skeptical of Musk’s involvement, pointing to the erratic nature of his tweets, which often have more to do with personal sentiments than with any fiduciary objective. Regardless though, it is clear that Musk’s stake in Twitter is substantial and influential.
My Analysis
Based on the evidence, it is clear that Elon Musk’s stake in Twitter has a substantial impact on the company. His tweets garner a large amount of attention, often leading to drops in the stock price. His investments in a third-party fund, along with his own 8.27 million shares, make him one of the largest individual stakeholders.
Furthermore, his presence as an investor and active Twitter user also gives the company a level of protection against potential acquisitions and takeover bids. Finally, it can be assumed that Musk’s stake in Twitter is advantageous for his other investments, helping him to promote the value of his other businesses through the use of Twitter.
