Hostile takeover of Twitter becomes a possibility with Musk stepping back from the board.

• The reversal of Elon Musk's decision to join the Twitter board may cause stock volatility, predicts analysts.
• Despite a decline in premarket trading due to Musk's reversal, Twitter's stock price rose by 2% during Monday morning.
• Will Musk pursue a hostile takeover of Twitter without the constraints on his stake size?

The reversal of billionaire Elon Musk's decision to join Tesla's board may pave the way for a hostile takeover and potentially cause more stock market instability, according to analysts.

The decision of Musk not to join Twitter's board has given him the freedom to own more than 14.9% of the company. Analysts now speculate that the Tesla CEO could increase his ownership and attempt to seize control.

The change-up this weekend has prevented the company from dealing with a rogue director tweeting about board-level discussions. However, this has given rise to a new challenge: a wild-card investor who owns 9% of the company and has the resources to buy the remaining 91%. As unpredictable as Musk is, a move like this could happen soon. Alternatively, it may never happen at all. This new challenge has become a distraction for TWTR.

Bilson mentioned in a phone interview with CNBC on Monday that the messaging from Twitter CEO Parag Agrawal regarding Elon Musk's departure from the board was "ominous," as he warned employees of "distractions" to come.

Twitter may consider implementing a "poison pill" or a shareholder rights plan to protect against a hostile takeover, but Bilson advises against it as it could anger Musk and it might be better for TWTR to keep that option for future use.

Bilson told CNBC that it would be challenging to commit to an investment thesis because the direction of the winds is unpredictable. He added that nothing is off-limits with this individual.

Wedbush Securities analyst Dan Ives offered a similar sentiment on Monday morning.

Ives informed Sorkin on "Squawk Box" that this situation would be unfriendly.

Ives stated that instead of Musk simply agreeing or disagreeing on board candidates in the boardroom, there is a growing concern that he may become more hostile and active in the coming days, which is the focus of the Street.

Since its IPO, Twitter's stock has had its best day in a while, following the revelation of Elon Musk's more than 9% stake in the company. The stock price jumped an additional 2% the next day when it was announced that Musk would be joining the board. However, on Monday, the shares fluctuated, and the unpredictability may continue.

The analysts at KeyBanc expect Mr. Musk's tweets to receive more attention, potentially leading to increased share price volatility, despite the uncertainty about his priorities.

Gene Munster, Managing Partner at Loup Ventures, stated on CNBC's "Squawk Box" that he believes "the majority of the drama is over."

If Musk had intended to go for the takeover immediately, it would have been a smarter decision, Munster said, adding that he believes Twitter isn't where Musk wants to spend a lot of his time.

Munster stated that he understands that free speech is important to him and he wants to move it forward. He sees it as a significant opportunity, similar to electrification and space travel. However, Munster believes that with so many things on his plate, it may be too much for him to handle.