In the latest twist in the Twitter-Musk feud, the social media platform has implemented a “poison pill” to prevent a hostile takeover after Musk offered to buy the company for $43 billion.
Twitter’s Board of Directors unanimously approved the limited duration shareholder rights plan. If a person or group acquires 15% or more of the company’s stock without the board’s approval, other shareholders can purchase additional shares at a discount.
The Rights Plan will expire after one year.
Twitter stated in a press release:
The Rights Plan will reduce the likelihood that any entity, person, or group will gain control of Twitter through open market accumulation without paying all shareholders an appropriate control premium or giving the Board enough time to make informed decisions and take actions in the best interests of shareholders.
Musk submitted a bid to the Securities and Exchange Commission (SEC) to buy the company in a letter to the Board on Wednesday.
Musk discussed the possibility of a hostile bid at TED2022, allowing him to bypass the board and discuss the offer directly with Twitter’s shareholders. “It would be utterly indefensible not to put this offer to a shareholder vote,” Musk later said.
According to analyst Dan Ives, the poison pill is a “predictable defensive measure… [it] will not be viewed positively by shareholders given the potential dilution and acquisition unfriendly move.”
The Board is up against a brick wall, and Musk and shareholders are likely to challenge the poison pill’s legality in court. We believe Musk and his team anticipated this poker move, which the Street will interpret as a sign of weakness rather than strength.
Musk also claimed to have devised a “Plan B” if the offer was rejected, but provided no further details on what it might be.