Twitter Goes on Defense After Elon Musk Hostile Takeover Bid With ‘Poison Pill’ Strategy

by Jonathan Howard
twitter-goes-defense-after-elon-musk-hostile-takeover-bid-with-poison-pill-strategy

Among the drama that is the Twitter and Elon Musk saga, the board has decided to make a big move. The so-called “poison pill.” Of course, any time a takeover is attempted by an individual like what Musk has proposed, companies have some options. They either agree to the sale. Or, they go on the defensive. In this case, Twitter has gone into defense mode.

“Poison Pill” Plan

  • Twitter has responded to the recent actions by Elon Musk with their “poison pill” plan
  • The defensive plan would flood the market if a shareholder garners 15% of total shares
  • Elon Musk bought over 9% of Twitter becoming the single largest shareholder
  • After the purchase, Musk made an offer to buy Twitter outright for $43 billion

Basically, while no one was really paying attention to what was going on, Musk bought up a bunch of Twitter stock. At over 9%, he was the single largest shareholder.

So, the “poison pill” will work like this… If a single shareholder acquires 15% or more of the company’s shares through means that weren’t approved by the board, then the plan kicks in. A flood of shares will be released into the market and the other shareholders will be able to buy up a bunch of those shares at drastically reduced prices. This would bring the share percentage down for the big fish, and quell the takeover.

These plans are also known as shareholder rights plans.

“The Rights Plan does not prevent the Board from engaging with parties or accepting an acquisition proposal if the Board believes that it is in the best interests of Twitter and its shareholders,” the site said in a statement.

Ultimately, this will prevent any unwanted takeovers from happening. While Twitter will keep its ears open to Elon Musk and his offers, they don’t want him to go behind their backs.

Talking Twitter, Elon Musk Says It Isn’t About Money

Through all of this, Twitter and Elon Musk have gone back and forth. On one hand, it looks like a play to acquire a bunch of shares. Then, after the shares are bought and made public, the news that Musk is involved will make the share price go up. Theoretically. However, the price has been going down and now this latest “poison pill” move will likely not help. Musk says it isn’t about the money but about “freedom” in a recent TedTalk.

Musk made an offer of $54.20 per share, $43 billion total. The current share price on the market is $45.08. So, he was going over the current evaluation price. Still, one can see why the shareholders want to keep their interest in the company. Tech is valuable to be in and a large number of shares is hard to come by for any investor in a company like Twitter.

This saga isn’t over, I’d say. After this latest move, Musk is sure to respond. He has been keeping folks updated on Twitter with various posts and memes and questions. Who knows what all is real and what is a joke? The tech giant CEO just seems to be looking to entertain himself for a while. There is no telling what he will do next.

Outsider.com