In the latest twist in the Twitter-Musk spat, the social media network has implemented a “poison pill” to thwart a hostile takeover after Musk’s attempt to acquire the firm for $43 billion.
Twitter’s Board of Directors unanimously approved the limited-term shareholder rights proposal. According to the proposal, if a person or group buys 15% or more of the company’s stock without the board’s consent, other shareholders may buy more shares at a discount.
After a year, the Rights Plan will be terminated.
Twitter said in a news release:
The Rights Plan will make it less likely for any entity, person, or group to gain control of Twitter through open market accumulation without paying all shareholders an appropriate control premium or giving the Board enough time to make informed decisions and take actions in the best interests of shareholders.
Musk submitted an offer to the Securities and Exchange Commission (SEC) to purchase the firm in a letter to the Board on Wednesday.
Musk mentioned the potential of a hostile bid during his lecture at TED2022, which would enable him to circumvent the board and debate the offer directly with Twitter’s shareholders. “It would be totally indefensible not to bring this offer to a shareholder vote,” Musk subsequently remarked.
The poison pill is a “expected defensive strategy… [it] will not be perceived favourably by shareholders given the probable dilution and acquisition hostile move,” according to analyst Dan Ives.
The Board is up against a brick wall, and Musk and shareholders are expected to dispute the poison pill’s legality in court. We think Musk and his team anticipated this poker play, which the Street will see as a show of weakness rather than strength.
Musk also claimed to have devised a ‘Plan B’ in the event that the offer was turned down, but he provided no additional information.