Twitter Uses ‘Poison Pill’ Tactics Against Elon Musk
TECHDIGEST – Twitter took efforts to reject billionaire Elon Musk’s unwelcome offer to take the company private and turn it into a stronghold of free expression by enacting a provision that would protect the company from hostile purchase bids.
The board established a one-year shareholder rights plan that can be exercised if a party purchases 15% of the stock without prior consent. According to a statement released on Friday, the proposal aims to ensure that anyone gaining control of Twitter through open market accumulation pays all shareholders a fair control premium.
According to a source familiar with the situation, Twitter implemented the plan to buy time. The board wants to be able to evaluate and negotiate any proposal before accepting it.
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The Rights Plan “does not preclude the Board from negotiating with parties or accepting an acquisition deal if the Board believes it is in Twitter’s and its shareholders’ best interests,” according to the firm.
Tesla Inc. CEO Elon Musk offered $54.20 per share in cash for Twitter on Thursday, valuing the social media company at $43 billion. Musk has already amassed a stake in Twitter of more than 9% since earlier this year, claiming it was his “best and last” offer. The board of directors of Twitter convened on Thursday to examine Musk’s proposal to see if it was in the company’s and all of its shareholders’ best interests.
A poison pill defensive tactic allows current shareholders to buy additional shares at a reduced price, effectively diminishing the hostile party’s ownership stake. Poison pills are frequently used by corporations facing activist investors or hostile takeover situations.
Each right will entitle its holder to purchase additional shares of common stock with a current market value of double the right’s exercise price at the then-current exercise price, according to Twitter’s plan.
