In the newest twist in the Twitter-Musk spat, the social media platform has introduced a “poison pill” to prevent a hostile acquisition after Musk’s $43 billion bid.
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The limited-term shareholder rights proposal was unanimously adopted by Twitter’s Board of Directors. According to the plan, if an individual or group purchases 15% or more of the company’s stock without the board’s approval, other shareholders will be able to acquire additional shares at a reduced price.
The Rights Plan will be discontinued after a year.
In a press statement, Twitter stated:
The Rights Plan will make it more difficult for any entity, person, or group to gain control of Twitter through open market accumulation without paying all shareholders an appropriate control premium or providing the Board with sufficient time to make informed decisions and take actions in the best interests of shareholders.
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Musk made a purchase offer to the Securities and Exchange Commission (SEC) in a letter to the Board of Directors on Wednesday.
During his talk at TED2022, Musk raised the possibility of a hostile takeover, which would allow him to bypass the board and debate the offer directly with Twitter’s shareholders. Musk then said, “It would be utterly inexcusable not to put this offer to a shareholder vote.”
According to analyst Dan Ives, the poison pill is a “anticipated defensive approach… [it] will not be seen favourably by shareholders given the projected dilution and aggressive takeover manoeuvre.”
Ives went on to say:
The Board is up against a brick wall, and Musk and shareholders are anticipated to sue to challenge the constitutionality of the poison pill in court. We believe Musk and his team foresaw this poker move, which Wall Street will interpret as a sign of weakness rather than strength.
Musk also claimed to have prepared a “Plan B” in the event that the offer was rejected, but he gave no more details.