Photo: The Canadian Press
FILE – The Twitter icon is displayed on a mobile phone in Philadelphia on April 26, 2017. Twitter said in a statement on Friday, April 15, 2022 that its board of directors has unanimously accepted the protection of the “poison pill” in response to the chief executive Director of Tesla Elon Musk’s offer to buy the company and take it private. (AP Photo / Matt Rourke, File)
Twitter’s board of directors says it has adopted protection with “poison pills” to protect the social media platform from “coercive or otherwise unfair” takeover tactics.
The company announced the move on Friday and provided more details in a regulatory dossier early Monday. On Thursday, Tesla CEO Elon Musk revealed an offer to buy the company for $ 43 billion, or $ 54.20 per share. He currently owns about 9% of Twitter.
A rights agreement agreed by the board will give shareholders the right to buy one thousandth of a share of preferred stock on April 25 for each ordinary share they hold, at a price of $ 210, if a person or group of investors acquires 15% or more of the company’s shares without board approval, Twitter said in a statement Monday to the US Securities and Exchange Commission.
The preferred share will have the same voting rights as the ordinary share. This will give existing shareholders more votes, making it difficult for the investor to take control of the company. Musk is not specifically mentioned in the documentation.
“The effect of the agreement may be to” impede or discourage a merger, tender or exchange proposal or other business combination involving the company, “the document said.
Despite protection with poison pills, the board still leaves open the possibility of negotiations with Musk or another suitor. The documentation states that the rights agreement must not interfere with a merger, offer or other business combination approved by the board.
The Twitter board has not officially rejected Musk’s proposal. Wedbush Securities analyst Daniel Ives said it was interesting that Twitter first submitted a shareholder rights plan before Musk refused, but he expected the refusal to come in the next 24 to 48 hours.
“Taking Twitter private at $ 54.20 should depend on shareholders, not the board,” Musk tweeted Thursday. He also said: “If the current Twitter board takes action against the interests of shareholders, they would be in breach of their trust. The responsibility they would take in this way would be titanic in scale. “
Twitter said in a statement Thursday that Musk had offered to buy the company for more than $ 43 billion. Musk said Twitter “needs to be transformed as a private company” to build trust with its users and do better in what it calls the “public imperative” of free speech.
Musk called the offer final, although he did not provide funding details. Such details could improve his chances of buying the company. Musk could probably raise some of the money by borrowing billions, using his stakes in Tesla and SpaceX as collateral.
Shares of Twitter rose nearly 3% to $ 46.38 in trading on Monday morning, still $ 7.82 less than Musk’s offer. This is a sign that investors are skeptical about whether Musk can execute the deal.
Musk has revealed in regulatory documents in recent weeks that he has bought shares on Twitter almost every day, starting on January 31 and ending with a share of about 9%. 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 social media company so he could buy more shares at lower prices.
On Monday, Musk wrote on Twitter that board members would not be paid if his proposal was successful. That will save Twitter about $ 3 million a year, he wrote.
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