In Response to Musk, Twitter Adopts 'Poison Pill'

Board adopts maneuver used to ward off hostile takeovers
By Newser Editors,  Newser Staff
Posted Apr 15, 2022 12:30 PM CDT
Twitter's Formal Response to Musk: a 'Poison Pill'
Tesla and SpaceX Chief Executive Officer Elon Musk.   (AP Photo/Susan Walsh, File)

It has the dry name of "a limited duration shareholder rights plan," per CNBC. But the layman's term for what Twitter's board just adopted is a "poison pill"—and the point is to at least temporarily fend off Elon Musk. The upshot of the move is that it will make it extremely difficult for Musk, who wants to buy the company for $43 billion, to increase his stake beyond 15%. He currently has about 9%. The Wall Street Journal explanation:

  • Poison pills are "are legal maneuvers that make it hard for shareholders to build their stakes beyond a set point by triggering an option for others to buy more shares at a discount. They are often used by companies that receive hostile takeover bids to buy themselves time to consider their options."

As CNN notes, the unanimous decision by the board doesn't rule out the possibility that Musk will eventually acquire Twitter, "but it could make buying the company more expensive or force Musk to the negotiating table with the board." The dry statement from the board:

  • "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."
The AP, meanwhile, notes that if Musk triggers the poison pill by increasing his stake, he "could still take over the company with a proxy fight by voting out the current directors." Twitter made a point to say the move doesn't prevent it from accepting an acquisition offer if it’s in the company’s “best interests.” (More Elon Musk stories.)

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