Twitter Stakeholders are Backing Musk! But it Could be the Worst Decision Ever

Tesla CEO Elon Musk acquired a 9% stake in Twitter to become its largest shareholder

Billionaire Elon Musk's reversal of his decision to join Twitter's board opens the door to a hostile takeover and could lead to additional volatility in the stock, according to analysts. Musk's decision not to join Twitter's board means he's no longer limited to owning just 14.9% of the company. Tesla CEO Elon Musk acquired a 9% stake in Twitter to become its largest shareholder at a time when he is questioning the social media platform's dedication to free speech and the First Amendment.

Ultimately, Twitter could decide to swallow a "poison pill," or a stakeholder rights plan to defend against a hostile takeover. It's going to be pretty hard to get committed to an investment thesis because you never know where the winds are going to flow.

Twitter's stock had its best day since its IPO after Musk's more than 9% stake in the company became public. It jumped an additional 2% the day after when the company revealed Musk would join the board. Shares fluctuated Monday and the unpredictability could continue.

A concern that Twitter's board is weighing is that unless it seeks to negotiate a deal with Musk, many stakeholders could back him in a tender offer, the sources said. While the poison pill would prevent Twitter Stakeholders from tendering their shares, the company is worried that its negotiating hand would weaken considerably if it was shown to be going against the will of many of its investors.

Short-term investors such as hedge funds want Twitter to accept Musk's offer or ask for only a small increase, the sources said. Some of these are fretting that a recent plunge in the value of technology stocks amid concerns over inflation and an economic slowdown makes it unlikely, that Twitter will be able to deliver more value for itself anytime soon.