Elon Musk's tweets about Twitter's deficiencies may have cooled for now, but make no mistake — his presence will hang over the company for some time and likely push the platform to be way better than it is today.
"We believe that Musk’s decision not to join the board will benefit shareholders as it will allow him to amass a >15% position and pressure management to deliver superior pace of innovation. We ultimately believe that Musk's presence will increase focus on KPIs [key performance indicators like revenue per employee, which has declined 7% over the last 4yrs (vs. +171% at Snap and Tesla +73%)," argued Jefferies tech analyst Brent Thill.
Shares of the social media platform are down about 5% this week as the company revealed Musk will not be joining the board.
"Elon has decided not to join our board," Twitter CEO Parag Agrawal said in a fresh tweet. "I sent a brief note to the company, sharing with you all here."
Continued Agrawal, "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. We announced on Tuesday that Elon would be appointed to the Board continent 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."
Agrawal went on to warn of "distractions ahead," a potential dig at Musk.
The news (which arrived after a weekend of wild Twitter-related tweets from Musk, including a since deleted poll to turn Twitter HQ into a homeless shelter) is an about face, but one that essentially turns Musk into an activist investor on Twitter, most pros on Wall Street believe.
When Musk took a 9.2% stake in Twitter, he agreed not to increase his stake to more than 14.9%. In exchange, he was given a seat on Twitter's board. That agreement is null and void, opening the door for Musk to increase his stake in Twitter and put further heat on Agrawal.
Jefferies' Thill said that is a good thing for Twitter, and there needs to be a focus on three key areas to help unlock value.
"We identify 3 key themes from Elon Musk's recent tweets: 1) platform health and improving the “signal-to-noise ratio” should be prioritized; 2) the company should revamp Twitter Blue and explore other non-ads initiatives. 3) Twitter needs to uphold its commitment to free speech. We view Musk's Twitter involvement and decision to turn down his board seat as a positive for the stock, as it allows him to increase his stake beyond the prior 14.9% cap," Thill explained.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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