Twitter’s board of directors has approved a “poison pill” limited-term shareholder rights plan that might make it more difficult for Elon Musk to acquire the firm.
The “poison pill” clause, which was published in a press release on Friday, protects the right of Twitter shareholders other than Musk to buy more shares at a low price, essentially reducing Musk’s holding. If Musk (or any other investor) buys more than 15% of the company’s stock, the provision will kick in. Musk presently owns roughly 9% of Twitter’s stock.
The move is a bid by Twitter’s board of directors to reclaim some control over the deal following Musk’s startling purchase offer. The poison pill, which is a corporate anti-takeover defence mechanism, won’t necessarily stop Musk’s bid in its tracks, but it might increase the cost of buying the company or force Musk to negotiate with 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 providing the Board with sufficient time to make informed judgments and take actions that are in the best interests of shareholders,” according to the company.
Musk made an offer on Thursday to buy all of the Twitter shares he doesn’t already own for $54.20 per share, valuing the firm at $41.4 billion. That’s a 38 percent premium over the stock’s closing price on April 1, the last trading day before Musk revealed he was Twitter’s largest shareholder, and an 18 percent premium over its closing price on Wednesday. Musk originally revealed that he had become Twitter’s largest shareholder 10 days before to the buyout offer (he has since been eclipsed by Vanguard Group).
The offer came at the end of a whirlwind 10-day period in which Musk revealed he had become the company’s largest shareholder, accepted a position on the board of directors only to abandon it, and tweeted about how Twitter may be dying and should consider dropping the “w” from its name, among other things.
The corporation now appears to be gearing up for a potentially lengthy purchase drama. Even so, there appear to be genuine doubts about Musk’s commitment to the deal. Musk, a successful but sometimes erratic entrepreneur who got into trouble with regulators in 2018 after falsely claiming that he had secured funding to take Tesla private, was in hot water with regulators after falsely claiming that he had secured funding to take Tesla private.
