The “poison pill” provision, announced in a press release on Friday, preserves the right for Twitter shareholders other than Musk to purchase more shares of the company at a relatively cheap price, effectively diluting Musk’s stake. The provision will be triggered if Musk (or another investor) acquires more than 15% of the company’s stock. Musk currently owns around 9% of Twitter stock. The move marks an attempt by Twitter’s executive board to regain some control of the deal following Musk’s stunning takeover bid. The poison pill — a corporate defense mechanism against takeovers — won’t necessarily stop Musk’s offer, but it could make the company more expensive to buy or force Musk to the negotiating table with the board.
“The Rights Plan will reduce the likelihood that a company, individual or group will gain control of Twitter through accumulation in the open market without paying all shareholders a reasonable control premium or allowing the board of directors adequate time to make informed judgments.” cases and take the best measures in the interests of shareholders,” the company said in its statement.
Musk did not immediately respond to a request for comment.
The CEO of Tesla and SpaceX on Thursday offered to buy all the shares he doesn’t own in Twitter for $54.20 per share, valuing the company at $41.4 billion. That represents a 38% premium from the close on April 1, the last day of trading before Musk announced that he had become Twitter’s largest shareholder, and an 18% premium from Wednesday’s close. The deal offer came 10 days after Musk first announced he had become Twitter’s largest shareholder (he has since been eclipsed by the Vanguard Group).
The offer capped a tumultuous 10-day period in which Musk revealed he’d become the company’s largest shareholder, accepted a position on the board only to vacate it, and consistently tweeted that Twitter might be dying and should consider delete the “w”. of his name, among other suggestions.
The company now appears to be gearing up for what could be a protracted acquisition drama.
Wedbush analyst Dan Ives called the poison pill a “predictable line of defense” by the Twitter executive, adding, “We think Musk and his team anticipated this poker move.” Ives also pointed out that there is a risk that the plan by Twitter could be challenged in court by Musk or other shareholders, which could enable the board to defend that the plan is in the best interests of shareholders.
Still, there seem to be serious doubts as to whether Musk, a successful but sometimes unpredictable entrepreneur who got into hot water with regulators in 2018 after falsely claiming he secured funding to take Tesla private, is serious means to push the deal forward.
Despite being the richest man in the world, how would he get the money to fund the nearly $42 billion deal? Musk himself admitted in an interview on Thursday that closing a deal would be challenging, saying, “I’m not sure I can actually acquire it.”
Twitter’s shares fluctuated a bit on Thursday but were mostly flat, closing at around $45, well below Musk’s bid price of $54.20 per share. The lack of enthusiasm – unusual after a takeover bid – suggests investor skepticism about the deal going through.
Twitter’s poison pill plan will remain in effect for a year, the board said. Additional details about the plan are expected to be released in a filing with the Securities and Exchange Commission, which is not yet publicly available.