Twitter (NYSE:TWTR) stock is up more than 20% today on news that Tesla (NASDAQ:TSLA) CEO Elon Musk has taken a 9.2% stake in the social media giant.
According to a regulatory filing with the U.S. Securities and Exchange Commission (SEC), Elon Musk owns 73,486,938 shares of Twitter. This represents 9.2% stake in the company that is worth $2.89 billion based on Twitter’s closing share price on April 1.
The purchase makes Musk the largest individual shareholder in TWTR stock.
While the SEC views the stake as a passive one, investors appear to be scrambling to buy TWTR stock today on hopes that Musk’s involvement could lead to something meaningful. Before today, Twitter’s stock was down 8% on the year at $39.31 per share. Over the past 12 months, Twitter’s share price has declined 40%.
What Happened With TWTR Stock
Disclosure of Elon Musk’s stake in TWTR stock comes less than two weeks after Musk criticized the company and said that he was giving “serious thought” to building a new social media platform.
Musk is no stranger to social media, having gotten into trouble with the SEC before for his tweets. At one point he had to agree to have his tweets vetted by Tesla after he said that he was considering taking Tesla private.
Free speech is essential to a functioning democracy.
Do you believe Twitter rigorously adheres to this principle?
— Elon Musk (@elonmusk) March 25, 2022
Musk has also publicly criticized Twitter and its policies over the last year, saying the company is “undermining democracy” by “failing to adhere to free speech principles.” Last week, the Tesla CEO polled Twitter users, asking them if they believe Twitter adheres to the principle of free speech. Over 70% of respondents said “no.”
Why It Matters
Musk currently has more than 80 million followers on Twitter and his tweets attract a lot of attention. He has been able to send the price of cryptocurrencies such as Dogecoin (DOGE-USD) higher with his tweets and he has also moved the price of TSLA stock on several occasions.
However, in 2018, Musk was called before the SEC after tweeting that he had secured funding to take Tesla private at $420 per share. That tweet resulted in lawsuits, a government investigation and Musk agreeing with the SEC to step down from his role as chairman of Tesla’s board of directors.
It is not clear if Musk plans to be an activist investor at Twitter or what he will ultimately do in the social media realm. However, his recent Twitter poll and comments about starting an entirely new social media platform are causing rampant speculation among investors.
What’s Next for Twitter
TWTR stock gets a nice boost today on news of Elon Musk’s stake. However, it’s not clear how involved Musk ultimately will be with Twitter or if he will increase his stake in the social media company further. Investors should stay tuned.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
