EXPLANATOR
On Friday, the Twitter board showed that it will not go quietly after Musk offered to buy the company.
Twitter is trying to thwart attempts to swallow billionaire Elon Musk with a “poison pill”, a financial device that companies have been using against unwanted suitors for decades.
On Thursday, Musk offered to buy Twitter, the revelation came just days after Tesla’s chief executive said he would no longer join the social media company’s board of directors.
He offered $ 54.2 a share on Twitter, calling the price his best and latest offer.
On Friday, the Twitter board said it would not go quiet, saying that any acquisition of more than 15 percent of the company’s shares without its approval would trigger a plan to flood the stock market, making buying much more difficult. .
What should poison pills do?
The ingredients of each poison pill vary, but they are all designed to give corporate boards the opportunity to flood the market with so many newly created stocks that takeovers are prohibitively expensive.
The strategy was popularized in the 1980s, when public companies were harassed by corporate attackers such as Carl Icahn – now more commonly described as “investor activists”.
Twitter did not disclose details about its poison pill on Friday, but said it would provide more information in an upcoming filing with the Securities and Exchange Commission, which the company delayed as public markets closed on Friday.
Musk currently owns about 9 percent.
Could a poison pill be a negotiation trick?
Although they are supposed to help prevent unwanted ingestion, poison pills also often open the door to further negotiations, which can force the participant to sweeten the deal.
If the higher price makes sense for the board, a poison pill can simply be thrown away along with the rage it causes, clearing the way for the sale to end.
True, Twitter has left its door open, stressing that its poison pill will not prevent its board from “engaging in parties or accepting a takeover bid” at a higher price.
Taking a poison pill also often leads to lawsuits alleging that a corporate board and management team use tactics to keep their jobs against the best interests of shareholders.
How did Musk react to the Twitter message?
Musk, with 82 million followers on Twitter, did not respond immediately to the company’s poison pill.
But on Thursday, he said he was ready to fight a court battle.
“If the current Twitter board takes action against the interests of shareholders, they would be in breach of their trust,” Musk tweeted. “The responsibility they would take in this way would be titanic in scale.
Musk has publicly said his $ 43 billion bid is his best and latest bid on Twitter, but other corporate suitors have made similar statements before eventually raising the bid.
With an estimated fortune of $ 265 billion, Musk seems to have deep enough pockets to raise his bid, although he is still working on how to fund the proposed purchase.
Musk also questioned Saudi Arabia’s role on Twitter Inc after Prince Alwaleed bin Talal tweeted his opposition to the billionaire entrepreneur’s offer to buy the social media company.
The prince tweeted on Thursday that Musk’s proposal did not come close to the “intrinsic value” of Twitter.
“As one of Twitter’s largest and long-term shareholders, @Kingdom_KHC and I reject this offer,” the prince said, referring to the Saudi-based Kingdom Holding Company he owns.
Musk responded to the tweet by asking how much of Twitter, directly or indirectly, is owned by Saudi Arabia.
“What are the kingdom’s views on journalistic freedom of speech?” Musk added.
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