Getty Images | Peter Dazeley
Twitter’s board of directors today approved a poison pill to prevent a hostile takeover in response to Elon Musk’s offer to buy the company. “The company on Friday adopted a so-called poison pill that is making it difficult for it to raise its stake above 15 percent,” The Wall Street Journal reported today.
In a press release, Twitter said the board unanimously “passed the Rights Plan following an unsolicited, non-binding proposal to take over Twitter.”
“The Rights Plan will reduce the likelihood that an entity, person or group will gain control of Twitter through accumulation of the open market without paying all shareholders an appropriate control premium or without giving the Board of Directors sufficient time to make informed decisions and take actions. doing what’s best.” interests of shareholders,” the announcement said.
Twitter said the move “will not prevent the Board of Directors from engaging with parties or accepting a takeover proposal if the Board believes it is in the best interest of Twitter and its shareholders.” The new shareholder rights are in effect for one year and are activated when a person, entity or group acquires 15 percent of the shares “in a transaction not approved by the Board of Directors”. Twitter explained further:
In the event that the rights become exercisable by exceeding the activating ownership threshold, each right entitles its holder (other than the person, entity or group activating the Rights Plan, whose rights become invalid and unexercisable) the right to purchase, at the then current exercise price, additional ordinary shares with a then current market value of twice the exercise price of the right.
Musk urged shareholders to vote
Musk was briefly Twitter’s largest shareholder with its 9.2 percent stake until Vanguard Group increased its ownership stake to 10.3 percent.
Bloomberg noted yesterday that a “defensive strategy against poison pills gives existing shareholders the right to buy additional shares at a discount, effectively diluting the opposing party’s ownership stake.”
In response to news that Twitter is considering a poison pill, Musk wrote: yesterday: “If the current Twitter board takes actions that conflict with the interests of shareholders, they would be violating their fiduciary duty. The liability they would take in doing so would be enormous.” Musk too surveyed Twitter users on whether his offer should be voted on by the shareholders.
Even before today, Twitter had statutes that “could complicate, delay or prevent an acquisition that our board of directors deems undesirable,” the company said in a February 2022 SEC filing. That includes “a classified board of directors whose members serve three-year staggered terms”, and the ability to “authorize”[e] “blank check” preferred stock, which may be issued by our board of directors without shareholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock.”
