In the latest development in the Twitter-Musk discordance, the social media platform has adopted a “poison pill” preventing it from undergoing a hostile takeover after Musk offered to buy the company for $43 billion.
The limited duration shareholder rights plan was adopted unanimously by Twitter’s Board of Directors. Under the plan, if a person or group acquires 15% or more of the company’s stocks without the approval of the board, other shareholders can purchase additional shares at a discount.
The Rights Plan will expire after a year’s duration.
In a press release, Twitter said:
The Rights Plan will reduce the likelihood that any entity, person or group gains control of Twitter through open market accumulation without paying all shareholders an appropriate control premium or without providing the Board sufficient time to make informed judgments and take actions that are in the best interests of shareholders.
On Wednesday, in a letter to the Board, Musk filed a bid with the Securities and Exchange Commission (SEC) to buy the company.
At his talk at TED2022, Musk opened up to the possibility of a hostile bid, allowing him to bypass the board and discuss the offer directly with Twitter’s shareholders. Musk later said, “It would be utterly indefensible not to put this offer to a shareholder vote.”
Analyst Dan Ives claims that the poison pill is a “predictable defensive measure … [it will] not be viewed positively by shareholders given the potential dilution and acquisition unfriendly move.”
The Board has [their] back against the wall and Musk and shareholders will likely challenge the merits of the poison pill in the courts. We believe Musk and his team expected this poker move which will be perceived as a sign of weakness not strength by the Street.
Musk had also claimed to have thought out a ‘Plan B’ if the offer was rejected but gave no further details as to what it may be.