UPDATE: This morning Elon Musk offered1 $54.20 per share in cash, a 54% premium over the Jan. 28 closing price at a valuation of $43 billion - Twitter shares rose 18% in pre-market trading.2 Elon discussing his vision for Twitter on TED today:

Twitter founders, Evan Williams and Biz Stone were free speech absolutists. Like their prior startup3, Twitter would be free from censorship - anyone would be free to write anything they liked without interference. They also believed it was vital for the company to remain politically neutral. That policy began to change when they handed the reins over to Jack Dorsey. Under his leadership, the company’s neutral stance was eroded as evidenced by Dorsey’s decision to moderate a White House Twitter town hall meeting with President Obama. Even more worrisome for free speech supporters was Dorsey’s decision to suspend America’s oldest newspaper founded by Alexander Hamilton to suppress information that would have negatively impacted Joe Biden’s chances of being elected.4 However, the last vestiges of Twitter’s founding spirit were crushed when the board appointed Parga Agrawal as CEO.

Agrawal emigrated from India in 2005 - a year before Williams and Stone started Twitter. Most Americans have no idea that the concept of ‘free speech’ is very different in India than it is here in the United States. Under the Indian constitution ‘freedom of speech’ does not confer an absolute right to express yourself freely.5 For example, the Indian constitution allows India’s leaders to limit speech that is critical of their government or even speech that might disrupt, offend, or disgust the average Indian. Agrawal believes that the American notion of free speech is both outdated and dangerous.

Prior to negotiating a handsome annual compensation package of $30,300,000 per year6, Agrawal made no secret of his opposition to America’s concept of freedom of speech. For example, in a 2018 interview7, Agrawal argued,

“Our role is not to be bound by the First Amendment, but our role is to serve a healthy public conversation and our moves are reflective of things that we believe lead to a healthier public conversation. The kinds of things that we do about this is, focus less on thinking about free speech, but thinking about how the times have changed.

One of the changes today that we see is speech is easy on the internet. Most people can speak. Where our role is particularly emphasized is who can be heard. The scarce commodity today is attention. There’s a lot of content out there. A lot of tweets out there, not all of it gets attention, some subset of it gets attention.”

His anti-free speech rhetoric only gained attention after his appointment, raising the ire of his wealthiest user - Elon Musk.

Like Twitter’s founders, Elon Musk considers himself a “free-speech absolutist” and considered Agrawal’s elevation to CEO a direct attack on speech. Musk describes Twitter as the nation’s ‘digital town square’ - a place where the freedom of speech should be protected by law. Former Twitter CEO, Dick Costolo, described Twitter as a “global town square” that functioned like the Greek Agora without the limitations of time and distance. He believed that it was of vital importance for people to be able to hear from their fellow citizens about what was happening to them and not through the lens of an ‘approved’ observer.8 That vision has been obliterated by Agrawal.

Just three months after Agrawal became CEO Musk began quietly buying shares in Twitter. Once investors learned, through Musk’s SEC filings, that the billionaire owned more than 9% of the company, Twitter’s valuation skyrocketed by more than $14 billion dollars overnight.9 Just days earlier Twitter’s bankers warned Agrawal that Musk was buying up large blocks of the company’s stock prompting the CEO to reach out to the company’s lawyers and Musk.

The most important job of a public company CEO is to increase the value of the company. Unfortunately for Agrawal, Twitter’s value declined almost every day of his tenure until Elon Musk began buying shares. Founded in 2006, the company’s EBITDA peaked in 2018 at $874.52M and has declined, more or less, since then with 2021 EBITDA coming in at $817.81M.10

In the days before news of Musk’s investment became public the company’s management team became more and more concerned that the billionaire might oust them. Channeling Michael Corleone’s famous line, “keep your friends close but your enemies closer” Agrawal invited Musk to join Twitter’s board. If they could convince him to join, Musk’s ownership of the company would be capped at 14% and his ability to criticize Twitter’s management team or board would be suppressed.

Agrawal and his fellow insiders were right to be concerned as their compensation packages are higher than most Fortune 500 managers and directors despite presiding over a company in financial decline. To add insult to injury Twitter’s leaders continue to grant themselves more and more stock in the company while turning around and selling it to the unsuspecting public. Remember that scene from Wall Street where Gordon Gecko speaks to the shareholders of Teldar Paper? If not check it out:

How easy would it be to imagine this scene with Elon and Agrawal? I decided to give it a shot, here are the script changes that would be necessary:

ELON MUSK: “Well, I appreciate the opportunity you're giving me Mr. Cromwell Mr. Agrawal as the single largest shareholder in Teldar Paper Twitter, to speak. Well, ladies and gentlemen we're not here to indulge in fantasy but in political and economic reality. America, America has become a second-rate power. Its trade deficit and its fiscal deficit are at nightmare proportions. Now, in the days of the free market when our country was a top industrial power, there was accountability to the stockholder. The Carnegies, the Mellons, the men that built this great industrial empire, made sure of it because it was their money at stake. Today, management has no stake in the company! All together, these men sitting up here own less than 3% 2.6% of the company. And where does Mr. Cromwell Mr. Agrawal put his million-dollar salary thrity-million-dollar salary? Not in Teldar Stock Twitter stock; he owns less than one percent. You own the company. That's right, you, the stockholder. And you are all being royally screwed over by these, these bureaucrats, with their luncheons, their hunting and fishing trips, their corporate jets and golden parachutes.”

PARGA AGRAWAL: “This is an outrage! You're out of line, Gekko Musk!”

ELON MUSK: “Teldar Paper Twitter, Mr. Cromwell Mr. Agrawal, Teldar Paper Twitter has 33 different vice presidents each earning over 200 thousand one million dollars a year. Now, I have spent the last two months analyzing what all these guys people do, and I still can't figure it out. One thing I do know is that our paper internet company lost 110 million 378 million dollars last year, and I'll bet that half of that was spent in all the paperwork going back and forth between all these vice presidents. The new law of evolution in corporate America seems to be survival of the unfittest. Well, in my book you either do it right or you get eliminated. In the last seven deals that I've been involved with, there were 2.5 million stockholders who have made a pretax profit of 12 billion dollars. Thank you. I am not a destroyer of companies. I am a liberator of them! The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper Twitter, but that other malfunctioning corporation called the USA. Thank you very much.

Gordon Gecko cuts right to the heart of the matter - the interests of Twitter’s management team and directors are not aligned with those of their shareholders. Agrawal owns less than .06% of Twitter and he’s so confident in his leadership that rather than buying more Twitter shares he’s selling them. So why would he want to stop Elon from buying anymore shares (especially since doing so increases the company’s value)? The answer is simple - he doesn’t want to lose his cushy $30M/YR job - full stop.

Surprisingly Elon Musk took Agrawal up on his invitation to join the board along with restrictions against buying more shares and speaking publicly about the company. Afterward Agrawal (foolishly) pressed his hand publicly stating, “having Elon as a fiduciary of the company, where he, like all board members, has to act in the best interests of the company and all our shareholders, was the best path forward…”11 The truth was that having Elon handcuffed would only help Agrawal - certainly not the company - Musk is the best thing to happen to the company in years. As a result, Musk informed the Agrawal that he was unwilling to agree to stop buying shares in the company or stop publicly sharing his opinions about the performance of management and would not be joining the board.

Fortunately for Parga Agrawal (not so fortunate for shareholders), the company has adopted various so-called “poison pills”12 to prevent a potential takeover by someone like Elon Musk. Twitter’s poison pills were drafted to make the company look less attractive to someone like Musk. The downside of these provisions is the simple fact that they reduce the value of the company and allow lackluster managers to keep their jobs despite less than stellar performance.13

Twitter’s Poison Pills:

Of course, there are antidotes to Twitter’s poison pills14 that could be employed by Musk including one proposed by Notre Dame Professor Julian Velasco in a paper titled, “Just Do It: An Antidote to the Poison Pill”.15 At the end of the day, assuming Musk wants to take control of Twitter, Agrawal can only delay the billionaire - he can’t stop him.

UDPATE: Elon Musk’s $54.20 tender offer would seem to be following Dr. Velasco’s ‘Just Do It’ antidote to Twitter’s poison pill…16

My advice to Agrawal, if he wants to keep his job, is to stop fighting Elon Musk and start working with him. A good start would be to reinstate every account that has been suspended for political speech - including the account of the former President of the United States. Twitter can be a great company and an even greater asset to democracy if it can return to its founding principle.

THE FILINGS

INITIAL PLEADINGS

PRIMARY SOURCE DOCUMENTS

CASE SCHEDULING ORDER

CONFIDENTIALITY ORDER

MOTION TO EXPEDITE

3rd PARTY SUBPOENAS

…coming soon