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Understanding Your Investments: What’s going on at Twitter?

Understanding Your Investments: What’s going on at Twitter?

April 20, 2022

If you’re anything like me, you’ve observed the pandemic environment from at least two different perspectives: as someone who was experiencing it, firsthand, and as someone who was watching others experience it. One of the more fascinating aspects has been the censorship that has taken place on various online platforms. I can’t claim to have been censored, but I’ve certainly played witness to acts of censorship, as I’m sure we all have.

 

My interest surrounding censorship has been particularly piqued when parties, who seem to be completely innocent, have gotten caught up in it. This has predominantly involved independent journalists who have published materials documenting certain events, and it has apparently been the events, themselves, that has been deemed sufficient to inform the need for censorship. (CLICK HERE for an article that tells the story of what one independent journalist experienced with YouTube.)

 

The reason I raise the topic of censorship is because it has been at the center of the public feud, you might call it, between Elon Musk and Twitter. In particular, it is Musk’s frustrations with the censorship in which Twitter has engaged that has brought him to the table wanting to effect change at the social media company (Source).

 

The real purpose of this post, however, is to give some insight into what Musk has done as a shareholder, because of what we all can learn as shareholders, having invested in various companies in various ways.

 

With that being said, what follows here is basically a chronological telling of the Musk-Twitter saga through various articles addressing the disparate aspects of the situation.

 

  1. Elon Musk recently purchased enough shares to own 9%+ of Twitter and was said to be the largest shareholder.
  2. He took this position “so [Twitter] can be transformed as private company.”
  3. He was offered a seat on the board of Twitter, but declined the offer, potentially offering insight into his true intentions.
  4. Twitter’s board responded by adopting a “poison pill” strategy, which gives current shareholders the ability to purchase additional shares at a discount.
  5. Jack Dorsey, one of Twitters cofounders and its former CEO, criticized the board as having “consistently been the dysfunction of the company.”
  6. As it turns out, the members of Twitter’s board own a very insignificant number of shares in the company, themselves.
  7. That fact, plus the board’s actions, led Musk to declare that the board’s interests are not aligned with shareholders.
  8. Essentially, what anyone is able to do with a company like Twitter is a function of momentum that is able to be gathered via support from others.
  9. With the right support, there are numerous things that could be done.
  10. Musk made a $43 billion bid to buy Twitter, but was quickly rebuffed by a Saudi prince who owns his own substantial amount of Twitter shares, revealing that Musk's intentions might not be so easily fulfilled.
  11. After remaining quiet for an extended period of time, the board at Twitter accepted Musk’s offer.
  12. In reality, Musk was apparently never the largest shareholder, as funds at the Vanguard Group increased Vanguard's aggregate position in Twitter to more than 10% in March.

 

One of the key takeaways for me was the emphasis that was placed on the fiduciary duty of Twitter’s board, and this is important to understand when it comes to being an investor. Much has been said about the fiduciary standard as of late and how it applies to those who serve you in the financial services industry. It needs to be acknowledged, however, that the companies in which you are invested owe you a fiduciarycommitment as well.

 

Simply put, the folks who run the companies in which we invest are accountable to us as investors. After all, as investors, we are owners. The relationship is analogous to owning your own small company and hiring someone to run it for you. Being in a position to run a company does not entitle you to run it any old way you want, especially if you are not the exclusive owner of the company. Even then, however, your customers would probably be a good barometer for determining the quality of your decisions.