Twitter adopts ‘poison pill’ defense in Musk takeover bid
Twitter’s board of directors has unanimously adopted a “poison pill” defense in response to Tesla CEO Elon Musk’s proposal to buy the company for more than $43 billion and take it private.
The move would allow existing Twitter shareholders - except for Musk - to buy additional shares at a discount, thereby diluting Musk’s stake in the company and making it harder for him to corral a majority of shareholder votes in favor of the acquisition.
Twitter’s plan would take effect if Musk’s roughly 9 percent stake grows to 15 percent or more.
The poison pill injects another twist into a melodrama surrounding the possibility of the world’s richest person taking over a social media platform he described as the world’s “de facto town square.”
Twitter said its plan would reduce the likelihood that any one person can gain control of the company without either paying shareholders a premium or giving the board more time to evaluate an offer. Such defenses, formally called shareholder rights plans, are used to prevent the hostile takeover of a corporation by making any acquisition prohibitively expensive for the bidder.
Even if it discourages his takeover attempt, Musk could still take over the company by waging a “proxy fight” in which shareholders vote to retain or dismiss the company’s current directors. Twitter said its plan does not prevent the board from negotiating or accepting an acquisition proposal if it’s in the company’s best interests.
“They’re gearing up for a battle here with Musk,” said Daniel Ives, an analyst for Wedbush Securities. “They also have to give themselves time to try to find another potential buyer,” he told AP.
While Musk’s $54.20-per-share offer is nearly 40 percent greater than Twitter’s stock price before he disclosed his huge investment, it’s still far below the peak closing price of $77.63 reached less than 14 months ago. At that time, Twitter was valued at about $62 billion.