Twitter announced on Friday that its board of directors had unanimously accepted the protection of the “poison pill” in response to a proposal by Tesla CEO Elon Musk to buy the company and make it private.
The move will allow existing shareholders on Twitter – with the exception of Musk – to buy additional shares at a discount, thus diluting Musk’s stake in the company and making it harder for him to win a majority of shareholders’ votes in favor of the acquisition.
Twitter’s plan will take effect if Musk’s stake rises from about nine percent to 15 percent or more.
Read more: Elon Musk wants Twitter to be a “platform for free speech.” What about misinformation?
The poison pill injects another twist in a melodrama about the possibility of the world’s richest man taking over a social media platform, which he described on Thursday as the world’s “de facto town square”.
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Twitter said its plan would reduce the likelihood that anyone would gain control of the company without paying a shareholder premium or giving the board more time to evaluate an offer. Such protections, officially called shareholder rights plans, are used to prevent a corporation from being taken over, making any acquisition prohibitively expensive for the offeror.
Even if this discourages his takeover attempt, Musk can still take over the company by waging a “proxy battle” in which shareholders vote to retain or dismiss the company’s current directors. Twitter said the plan did not prevent the board from negotiating or accepting a takeover bid if it was in the company’s best interests.
“They are preparing for a battle here with Musk,” said Daniel Ives, an analyst at Wedbush Securities. “They also need to take the time to try to find another potential buyer.”
2:05 #HostileTakeover: Billionaire Elon Musk Wants to Buy and Change Twitter #HostileTakeover: Billionaire Elon Musk Wants to Buy and Change Twitter
Musk offered to buy the company directly for more than $ 43 billion, saying it “needs to be transformed as a private company” to build trust with its customers and do better in what it calls ” the social imperative ”of freedom of speech.
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“Having a public platform that is highly trusted and inclusive is crucial to the future of civilization,” he said in an interview on the stage of a TED event on Thursday, just hours after his offer was announced.
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Musk has revealed in recent regulatory documents that he has bought shares on Twitter almost every day, starting Jan. 31, ending with a stake of about nine percent. Only the Vanguard Group controls more Twitter shares. A lawsuit filed Tuesday in federal court in New York alleges that Musk illegally delayed the disclosure of his stake in a social media company so he could buy more shares at lower prices.
After Musk announced his stake, Twitter quickly offered him a seat on the board, provided it limited its purchases to no more than 14.9% of the company’s outstanding shares. But the company said five days later that Musk had refused.
Read more: Elon Musk offers to buy Twitter for $ 43 billion
Ives said the path to Twitter’s poison pills was a predictable defensive maneuver, but could be seen as a “sign of weakness” on Wall Street.
Musk may try to fight the measure in court, but “no court has overturned the poison pill in 30 years,” said Columbia University law professor John Coffey. Bringing together shareholders to throw off the board may be more feasible, but it is also a challenge for Musk, Coffee said.
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Musk’s proposal has already met with resistance before Twitter launched its counterattack on Friday.
The Saudi prince, who is one of Twitter’s main shareholders, scoffed at Musk’s tweet on Thursday. Al-Walid bin Talal said he would reject Musk’s initiatives because he did not believe that $ 43 billion “is close to the intrinsic value of Twitter, given its growth prospects.” The prince tweeted with another from 2015, revealing that his company Kingdom has increased its share of Twitter to 5.2% – about half of what Musk now owns.
While Musk’s $ 54.20 share offer was nearly 40 percent higher than Twitter’s share price before revealing its huge investment, it is still well below the $ 77.63 peak closing price. less than 14 months ago. At the time, Twitter was valued at about $ 62 billion.
Musk tweeted to the prince, asking how many shares he owns on Twitter, and then did something that may have been a veiled reference to the 2018 assassination of journalist Jamal Hashoghi in connection with Saudi Crown Prince Mohammed bin Salman. What are the Kingdom’s views on journalistic freedom of speech? Musk tweeted on Thursday.
Interesting. Just two questions, if you can.
What part of Twitter does the Kingdom own, directly and indirectly?
What are the kingdom’s views on journalistic freedom of speech?
– Elon Musk (@elonmusk) April 14, 2022
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As investors are skeptical about Musk’s offer, Twitter shares fell on the first day of trading after the takeover bid was announced on Thursday – just the opposite of what the market’s approval response looks like. The exchanges were closed on Friday for Good Friday. Twitter said it plans to reveal more details about its shareholder plan in an upcoming regulatory bid.
Another outspoken billionaire, Dallas Mavericks owner and technology investor Mark Cuban, also took to Twitter to share his theory that Musk was making an offer to raise the company’s share price so he could sell his stake at a profit. Using an obscene term, Cuban also postulated that Musk used the offer to torture the U.S. Securities and Exchange Commission, the stock market regulatory agency that fined Musk $ 20 million in 2018 after he tweeted about potential purchase of Tesla, which never took place.
At the TED event on Thursday, Musk made it clear that he was still angry with the SEC and cursed regulators with curses.
© 2022 The Canadian Press
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