Technology news

Twitter adopts ‘poison pill’ to thwart Elon Musk takeover bid | Tech News

The strategy allows existing shareholders to purchase additional shares at a discount and has been in place for a year.

By Bloomberg

Twitter Inc. has passed a measure that would shield it from hostile takeover bids, moving to thwart billionaire Elon Musk’s unwelcome bid to take the company private and turn it into a bastion of free speech.

The board has put in place a shareholder rights plan, exercisable if a party acquires 15% of the shares without prior authorization, for a period of only one year. The plan aims to ensure that anyone gaining control of Twitter through open market accumulation pays all shareholders an appropriate control premium, according to a statement on Friday.

Twitter adopted the plan to save time, according to a person familiar with the matter. The board wants to be able to analyze any deal and can always agree to it.

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

The CEO of Tesla Inc. offered $54.20 per share in cash for Twitter on Thursday, valuing the social media company at $43 billion. Musk, who said it was his “best and last” offering, had already acquired a more than 9% stake in Twitter since the start of this year. Twitter’s board of directors met Thursday to review Musk’s proposal to determine whether it is in the best interests of the company and all of its shareholders.

A poison pill defense strategy allows existing shareholders to buy additional shares at a discount, diluting the hostile party’s stake. Poison pills are common among companies under fire from activist investors or in hostile takeover situations.

Under Twitter’s plan, each right will entitle its holder to purchase, at the then-current exercise price, additional shares of common stock having a then-current market value equal to twice the exercise price of the right.

‘To like’

Included in Musk’s securities filing disclosing the offer Thursday morning was a text script he sent to the company. He said: “It’s a high price and your shareholders will love it”.

At least one prominent investor, however, said the offer was too low and the market reaction seemed to agree. Prince Alwaleed bin Talal of Saudi Arabia mentioned the deal doesn’t “come close to the intrinsic value” of the popular social media platform.

Speaking later Thursday at a TED Talk, Musk said he wasn’t sure he “could actually get it.” He added that his intention was also to retain “as many shareholders as the law allows”, rather than retaining sole ownership of the company himself.

Shares of Twitter fell 1.7% in New York on Thursday, reflecting market sentiment that the deal is likely to be rejected or fall through. The Wall Street Journal earlier reported that the San Francisco-based company was considering a poison pill defense.

Musk unveiled his stake on Twitter for the first time on April 4, making him the largest individual investor. At the TED talk, he said he had a plan B if Twitter’s board rejected his offer. He declined to elaborate. But in his filing earlier today, he said he would reconsider his investment if the bid fell through.

“If the deal doesn’t work out, given that I don’t have confidence in management and don’t think I can drive the necessary change in the public market, I should reconsider my position as a shareholder,” Musk said. .

–With the help of Sarah Frier.