Free Speech as a Business Strategy

Elon Musk could be Twitter's most famous "tweep." Now, he's definitely its most important investor. In a regulatory filing this morning, the Tesla founder and CEO disclosed that he owns 9.2% of Twitter's stock, making him the company's largest individual shareholder. Twitter's own co-founder Jack Dorsey owns 2.6% of the company.

So what does a car and space magnate want with a social media company? Musk has been outspoken about his desire for Twitter to loosen restrictions around content. Just a few weeks ago, the billionaire tweeted: "Given that Twitter serves as the de facto public town square, failing to adhere to free speech principles fundamentally undermines democracy."

"Would you consider building a new social media platform," a Twitter user asked.

"Am giving serious thought to this," Musk replied. Just about a week later, he has invested roughly $3 billion in Twitter instead. 

The reaction on Wall Street was fascinating. Twitter has long struggled to make profits on par with its influence. But Musk's involvement has everyone recalculating. In soaring 27%, Twitter stock had its best day ever. It was also the best-performing and most actively traded stock in the S&P 500 on the day. 

Is Free Speech suddenly Good Business? Probably not. The better explanation for the stock's rise is that investors are counting on Musk to keep buying stock and possibly even take the company private. "As one of the wealthiest people on the planet, Musk can afford his Twitter investment as a free-speech protest, while spending just 1% of his net worth," my colleague Bill Alpert wrote about Musk's initial stake. 

For now, Musk is taking a hands off approach. His filing with the Securities and Exchange Commission came in a Schedule 13G, which suggests that he isn't planning to influence the company's board or agitate for change. That kind of activist investing requires a more complicated Schedule 13D filing. Tweets about Twitter undermining democracy apparently don't count. 

Read the rest of Bill's story, along with additional Twitter/Musk coverage from Barron's Ben Levisohn and Al Root here.