The elephant in the room…
Key takeaways
- Elon Musk wrapped up his purchase of a 9.2% stake in Twitter, which drove a 27% rally in Twitter shares.
- While most fund managers buying a relevant position in a public company tend to be “activist investors”, Musk has kept quiet on his intentions.
- As decentralization becomes more of a possibility for Twitter, who would be the best person to lead the app in its next chapter?
We asked Yieldstreet’s followers that question just as Elon Musk wrapped up his purchase of a 9.2% stake in the social network, which – just as about anything Musk does – created enormous market buzz. It drove a 27% rally in Twitter shares as well as a 150% rally in DogeCoin – a popular meme coin – and could elicit an SEC investigation due to the delayed report of his newly acquired stake.
While most fund managers buying a relevant position in a public company tend to be “activist investors” and often make strong public statements about how they would like to change the company’s direction, Elon Musk has kept quiet on his intentions, at least for now. In a preview of what to expect going forward, however, he shared a poll with users asking if they would be favorable to adopting a new feature that would allow the editing of existing Tweets. The public responded with an enthusiastic yes.
In all fairness, the idea was already out there, having been first floated by Parag Aghrawal, one of Twitter’s co-founders. But Musk’s direct dialogue with his followers – on a scale that traditional finance professionals may find borderline manipulative – and his credentials as an out of the box thinker and a relentless innovator beg the question of what more is in store for Twitter investors and – its management.
Again, one can look at Bill Ackman – a well-known activist investor – for clues, but that is unlikely to give a complete picture. The goal of a traditional activist investor is usually to push for the implementation of strategic changes – on new product development, for instance – by utilizing persuasion and in some cases by strong-arming existing investors.
But in the history of finance, there has not been an activist investor with 80 million followers and the capacity to single-handedly provoke wild market moves, like Musk. He will likely see no need to convince other investors that his plans for Twitter are the best possible ones – he’ll just tweet it to his followers to generate pressure that even the most structured company may have a hard time coping with.
It also adds a layer of complexity for regulators, who will now have to deal with a global influencer “owning” a large stake in his medium of communication, while at the same time being capable of generating attention and provoking substantial market moves that will affect him as well as other Twitter investors. What will happen – for instance – if Musk decides to sell his shares because he’s unhappy with the company’s direction? – It is hard to fathom and may frankly be an event unseen in the history of public equities trading.
As our poll results show, not even our crowd could resist the appeal of Tesla’s CEO: asked who’s the best choice for Twitter’s CEO, over 70% of our respondents picked him. That’s not an election win – it’s a landslide.
Learn more about the ways Yieldstreet can help diversify and grow your portfolio.
Published:
04/06/2022
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