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June 2022
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Analysis: Florida pension fund takes on Elon Musk

Twitter
By Paul Mackintosh   
May 11, 2022

The antics of plutocrats can always provide entertaining diversion from the equally theatrical and self-serving antics of autocrats. So it is with Elon Musk’s US$44 billion takeover bid for Twitter Inc., and the complaints and countermeasures launched against it.

For institutional investors in particular, the news that the Orlando Police Pension Fund filed suit in Delaware Chancery Court against Musk and Twitter in an attempt to block the sale should restore at least a little faith in the US pension system, as well as adding to the many principled and practical objections to the deal.

It’s ironic that this development should have come out of Florida, rivalling Texas as a haven for the most unhinged Randian extremes of entrepreneurial egotism. But at least one pension fund had fiduciary obligations to their pensioners as their overriding priority.

The Orlando Police Pension Fund’s suit claims that Musk was operating in concert with other key Twitter stakeholders - notably founder Jack Dorsey and investment bank Morgan Stanley - when making his take-private offer and triggered a Delaware law requiring a three-year waiting period to conclude such deals.

The pension fund’s complaint is described as a class action suit “on behalf of itself and all other similarly situated public stockholders of Twitter, Inc.”. It says Musk needs to either wait the stipulated three years, or obtain voting approval from 66 2/3% of other holders of Twitter stock. It also alleges that Musk failed to inform the US Securities and Exchange Commission within ten days when he crossed the 5% threshold in early April 2022 by acquiring some 9.2% of Twitter common stock, and that current directors of the social media platform failed to honour their fiduciary duty by triggering the statutory shareholder vote, despite knowing that Musk had become an interested shareholder.

The pension fund’s exact motives in launching the class action suit are not clear, beyond the entirely laudable aim to clarify the “questions of law and fact” that it raises regarding Musk’s bid and his alleged collusion with other shareholders. It makes clear that the lawsuit seeks “such other and further relief as this Court may deem to be just, equitable, and proper”.

In a deal of this size, such relief certainly could be substantial. And even assuming that the pension fund’s motives are entirely self-interested and devoted solely to securing the best possible deal for its pensioners, it’s hard to argue against them on more principled grounds. Musk has claimed that he is a free speech proponent who will make Twitter an even better platform for free comment and communication; but unsurprisingly, scepticism has greeted this assurance by the world’s richest man.