Good morning,

Today’s Update is an excellent example of how Twitter’s impact and importance remain completely divorced from the strength of its underlying business.

On to the update:

Musk Declines Twitter Board Seat

Twitter CEO Parag Agrawal, on Twitter:

Well, well, well. If ever there were a block of text that called for a sentence-by-sentence breakdown (a “fisking”, for all of you old-timers), it certainly is this one. Let’s commence:

The Board and I had many discussions about Elon joining the board, and with Elon directly. We were excited to collaborate and clear about the risks. We also believed that 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. The board offered him a seat.

First, offering Musk a board seat was a very smart move by Twitter for the exact reasons Agrawal lays out: being a board member comes with certain responsibilities and, crucially, certain liabilities (i.e. shareholder lawsuits), which could serve as a constraint on Musk’s actions. This benefit was arguably even more important than Musk agreeing to not buy more than 14.9% of Twitter while on the board, or for 90 days afterwards.

This, of course, is why Musk joining the board was such a surprise: I noted in my Daily Updates last | week that Musk’s power was (1) not due to his board seat and (2) far greater than his ownership share, thanks to the way he single-handedly made Twitter into a meme stock dependent on his continued interest and involvement. Given that, why would Musk want any constraints on his actions?

We announced on Tuesday that Elon would be appointed to the Board contingent on a background check and formal acceptance. Elon’s appointment to the board was to become officially effective 4/9, but Elon shared that same morning that he will no longer be joining the board. I believe this is for the best. We have and will always value input from our shareholders whether they are on our Board or not. Elon is our biggest shareholder and we will remain open to his input.

Agrawal seems to have listed two “best” paths forward, but I can sympathize with the fact his head is probably spinning; what does seem clear is that Musk realized that being a board member would suck, and, as noted, Twitter now has to be even more open to his input. Also, there is one other potential factor at play here: recall that Musk originally filed a disclosure form that suggested he would be a passive investor (and too late at that); after his nomination to the board was announced Musk refiled the more comprehensive form required of activist investors. It’s certainly possible that Musk went along with Twitter’s offer just to give cover for his refiling. Or maybe he was bored, and is now ready to move on.

There will be distractions ahead, but our goals and priorities remain unchanged. The decisions we make and how we execute is in our hands, no one else’s. Let’s tune out the noise, and stay focused on the work and what we’re building.

Or maybe not! “There will be distractions ahead” is arguably the single most interesting sentence in Agrawal’s tweet. The most peaceful distraction would be more of Musk doing what he did all weekend: tweeting commentary on Twitter’s features, business model, office utilization, overall health, etc. (many of these tweets have been deleted, by the way), and expecting some sort of response. The least peaceful distraction would be actually trying to take Twitter over.

Twitter’s Poison Pill

A hostile takeover of Twitter would actually be quite difficult, as Twitter’s bylaws are already chock-full of standard poison pill provisions. From the risk factors of Twitter’s most recent 10-K:

Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions which could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our board of directors. Among other things, our amended and restated certificate of incorporation and amended and restated bylaws include provisions:

• providing for a classified board of directors whose members serve staggered three-year terms;
• authorizing “blank check” preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock;
• limiting the liability of, and providing indemnification to, our directors and officers;
• limiting the ability of our stockholders to call and bring business before special meetings;
• requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors; and
• controlling the procedures for the conduct and scheduling of stockholder meetings.

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management, and amendment of our amended and restated certificate of incorporation to change or modify certain of these provisions requires approval of a super-majority of our stockholders, which we may not be able to obtain.

The first takeaway is that a hostile takeover is extremely unlikely; the second takeaway is that the Board of Directors still does have a fiduciary duty to consider any offer presented to it; the third takeaway is that the entire reason this section exists in the 10-K is for the express purpose of covering the Board of Directors rear ends if they say no anyways.

Here is what would be weird about any sort of Musk offer: the premium is already priced in! Given Twitter’s lack of profitability and overall stagnation, a 30% premium seems fairly reasonable (spit-balling here, to be clear); to put it another way, why would Musk want to offer a significant premium over today’s price given that today’s price is already due to him?

This is why I come back to the point I’ve made all along: Musk right now already has significant influence over Twitter, and he accomplished that without having to buy the company, and he is preserving that by declining a board seat. Granted, this control may not last for long, but the only losers in a slumping stock price scenario are other Twitter shareholders and the Board of Directors. Oh, and when and if Musk exits the stock or sees it slump? That is the time to take the whole thing over — if he still has interest.

The New York Times’ Twitter Reset

From Business Insider:

The New York Times is issuing a Twitter “reset” for its newsroom staffers, according to a memo sent by Executive Editor Dean Baquet on Thursday, which Insider has obtained. Baquet wrote that maintaining a Twitter presence is now “purely optional” for Times journalists. A Times spokesperson told Insider that this is “absolutely not a ban” and that the move was made in response to concerns that had been raised in the newsroom.

Baquet’s memo makes some very salient points; to highlight a few:

We can rely too much on Twitter as a reporting or feedback tool — which is especially harmful to our journalism when our feeds become echo chambers. We can be overly focused on how Twitter will react to our work, to the detriment of our mission and independence. We can make off-the-cuff responses that damage our journalistic reputations. And for too many of you, your experience of Twitter is shaped by harassment and attacks.

I could not agree with this more; I think Twitter has been extremely detrimental to journalism, for the exact reasons Baquet states: journalists write and tweet for other journalists, radicalizing each other into a uniform yet extreme position on nearly every topic, and they do so in plain sight of everyone else. No wonder so many people assume the resultant stories, even if written even-handedly, are biased; journalists seem to think that Twitter is just a place to chat, and that their stories are their real work, but that is not how the rest of the world sees it.

I recognize that in the past, we’ve strongly urged you to use it to get our journalism in front of more people, engage with readers and uncover stories. This is a complicated topic, and our views have evolved considerably over the last several years. I’m sure they’ll continue to. I want to be clear that we’re here to support you. That might mean offering guidance and protection against harassment; working with our audience team to responsibly promote stories online; or simply offering encouragement if you do decide to step away from social media.

The New York Times’ previous policy of actively encouraging or even requiring a social media presence was misguided on multiple fronts.

First, it misunderstood the benefit of social media to publications. The power of social media does not come from the fact that it gives the writer a platform — the writer already has a platform, whether that be their own personal blog, or their perch at the New York Times. The real benefit is that it gives every reader of the article a platform to share the article with their followers, which is far more powerful than the writer giving away the article in some forgettable thread.

Second, Twitter really is an echo chamber, and not just ideologically. I remember a moment, relatively early on in Stratechery’s run, where I realized that the vast majority of my interactions on Twitter were with the same set of people, and that the number of people in that set did not at all correlate to the number of subscribers I had. At that moment a light went on for me that I was running the risk of over-indexing on the small portion of my audience that had the inclination to yell at me on Twitter, even though that segment was by definition not representative of my subscriber base (I still love all of you).

This, by the way, is one of the real benefits of a subscription model: everyone craves feedback, which is why it doesn’t make sense to me when certain publications brag that their writers don’t see their pageview numbers; that just means said writers are going to over-index even more strongly on Twitter. Subscriber numbers, on the other hand, are a distinct signal that is not only aligned with the overall health of the business, but is also more likely to come from people who aren’t sitting on Twitter all day (since they need to earn money!).

Third, from a value chain perspective the New York Times absolutely has an adversarial relationship with its writers. The more that readers subscribe to the New York Times, without caring about who is writing the articles, the more value the New York Times can extract; the more that readers care about the author and not the publication, the more value the author can extract. This tension has only become more apparent with the rise of Substack (although I would argue that while Substack originally made all writers seem more valuable, it is now becoming clear that there is likely a correlation between the degree to which a writer is a contrarian to the New York Times party line and their ability to monetize independently). To that end, I think it would be eminently justifiable for the New York Times to ban prominent Twitter presences completely; subscribers pay for articles, not tweets.

I want to emphasize that your work on social media needs to reflect the values of The Times and be consistent with our editorial standards, social media guidelines and behavioral norms. In particular, tweets or subtweets that attack, criticize or undermine the work of your colleagues are not allowed. Doing so undercuts the reputation of The Times as well as our efforts to foster a culture of inclusion and trust.

This is just reiterating a long-standing New York Times policy about not attacking peers, but the underlying principle — that the New York Times comes first, not the writer’s individual point of view, or even economic interests — is really what undergirds all of these points:

• Does the New York Times want to be defined by its writers’ tweets, or by the articles it publishes via its editorial process?
• Does the New York Times want to be incentivized by its underlying business model, or by engagement and feedback on Twitter?
• Does the New York Times want to capture the value of the writing it pays for, or give that value away to the writers it is paying?

All of these are, to be clear, very cold-blooded business considerations: I personally would very much chafe against these limitations. This, though, is where Substack is an opportunity for the New York Times: if writers think they should be able to say what they want and that they, not the New York Times, are responsible for their audience, then it is easier than ever for them to monetize that; to put it another way, the New York Times should feel empowered to do what is right for the New York Times precisely because writers have alternatives.

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