Twitter announced on Friday that it had adopted a plan for a “poison pill” that could prevent billionaire Elon Musk from significantly increasing his stake in the social media company. The countermeasure comes a day after Tesla CEO Musk uncovered a hostile $ 43 billion bid for Twitter.
In a statement, Twitter said the new plan would reduce the chances of any person, group or company taking control of Twitter by buying shares on the open market without paying an “appropriate control premium” or giving the board enough time to make informed judgments. . “
Musk, who revealed earlier this month that he owns a 9.2 percent stake in Twitter, offered in a regulatory bid Thursday to buy all of the company’s common stock for $ 54.20 a share. But investors have signaled they are skeptical of the offer, with shares actually closing below the previous day’s price at $ 45.08 a share.
A large investor has already spoken out against the proposal. Saudi Arabia’s Prince Alwaleed bin Talal, who controls more than 4% of Twitter, according to Bloomberg News, said on Thursday that he was “rejecting” the offer.
In his offer letter, Musk said he wanted to make the company private, adding that his offer was “not a threat”. However, he added that if he could not buy Twitter, “he will have to reconsider my position as a shareholder.”
What is a “poison pill”?
The so-called poison pill plan is designed to give a hostile acquisition company more leverage in the situation. It emerged in the 1980s when lawyers for an oil company targeting corporate raider T. Boone Pickens advised the company to flood the market with new stocks, making it difficult to buy a controlling stake in Pickens, according to the Corporate Finance Institute. .
In the case of Twitter, the plan will take effect if a person or group buys at least 15% of Twitter’s shares in a purchase that is not approved by its board.
If triggered by such a purchase, the plan will give other shareholders the right to buy additional shares of Twitter shares at a discount, which will then reduce the value of Musk’s shares. This would effectively reduce the control that Musk could gain through stock purchases.
Twitter said the plan did not prohibit its board from accepting a takeover bid if it believed “it is in the best interests of Twitter and its shareholders”.
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