Twitter uses a poison pill to counter Musk’s takeover
Twitter launched its counterattack against Elon Musk on Friday, using a contrived strategy to repel corporate assailants in an attempt to block a takeover bid for the world’s richest man.
The strategy, known as the poison pill, would flood the market with new stocks if Mr. Musk, or any other individual or group working together, bought 15 percent or more of Twitter shares. This would immediately reduce the involvement of Mr. Musk and significantly hinder the purchase of a significant potion from the company. Currently, Mr. Musk owns more than 9 percent of the company’s shares.
The goal is to force anyone trying to acquire the company to negotiate directly with the board. Investors rarely try to exceed a poison pill threshold, stock experts say, with the warning that Mr. Musk rarely sets precedents.
Companies are often wary of using toxic pills because they do not want to be seen as hostels with shareholders. However, some critics, such as Institutional Shareholder Services, an influential advisory group, have indicated that they are open to tactics in certain circumstances.
Twitter said the mechanism would not prevent the company from holding talks on a sale with any potential buyer and would give it more time to negotiate a deal that offers a sufficient premium.
The pill “does not mean that the company is independent forever,” said Drew Pascarella, a tenured professor of finance at Cornell University. “It just means they can effectively defend Elon.”
Mr. Musk announced on Thursday its intention to acquire the social media service, making public an unsolicited offer worth more than $ 40 billion. In an interview later that day, he criticized Twitter’s moderation policies, calling Twitter the “de facto square of the city” and saying that “it’s very important that people have the reality and perception that they are able to speak freely.” within the limits of the Law. “
Read more about Elon Musk and his Twitter offer
The billionaire’s bid could be worth more than $ 40 billion and have far-reaching consequences for the social media company.
He also said he had a plan B if the board rejected his offer, even though he did not share it.
Analysts have said that Mr. Musk, which offers much more per share than the current share price, but is well below its high last year, may underestimate the company. They have also raised concerns about the ability of Mr. Musk to prepare funding. If the board negotiated an agreement with Mr. Musk, could include a major breakout rate that could alleviate concerns about its volatile nature in conflict with the ability to close the deal, some securities lawyers said.
Twitter has been trying to fight the richest man in the world for the past few weeks as it took its actions. Last week, Twitter offered Mr. Musk took a seat on the board, but became bitter about the deal when it became clear he could no longer freely criticize the company. He turned down the role on Saturday and reported on Twitter on Wednesday evening of his acquisition plans.
Twitter said in a statement that its toxic pill plan, which will run until April next year, “is similar to other plans adopted by public companies under comparable circumstances.”
Twitter’s other major shareholders, according to FactSet, include investment giant Vanguard Group, the largest, with a 10.3 percent stake; Morgan Stanley Investment Management, with an 8 percent stake; and BlackRock Fund Advisors, with a 4.6 percent stake.
Ark Investment Management, led by Cathie Wood, a star of the Reddit investing community who has previously bet on Mr. Musk, has a 2.15 percent stake. One of the founders of Twitter, Jack Dorsey, who is a friend of Mr. Musk, has a 2.2 percent stake. The Twitter board, which includes Mr. Dorsey, voted unanimously to approve the poison pill.
Mr. Musk appeared to be fit for a lengthy fight on Thursday. “Taking private Twitter for $ 54.20 should depend on shareholders, not the board,” he tweeted, along with a Yes / No poll.
The initial offer of Mr. Musk left significant questions open. Mr. Musk has hired Morgan Stanley to advise on the offer, though the investment bank is not known to fund large-scale business on its own. And Twitter shareholders seemed suspicious: Twitter shares fell nearly 2 percent on Thursday, closing at $ 45.08, well below Mr. Musk. U.S. stock markets closed Friday for Good Friday celebration.
Prince Al Waleed bin Talal of Saudi Arabia, who described himself as one of Twitter’s largest and long-term shareholders, said on Thursday that Twitter should reject Mr. Waleed bin Talal’s offer. Musk because it was not high enough to reflect the “company”.intrinsic value. ” Analysts also suggested that the price of Mr. Musk was too low and did not reflect Twitter’s recent performance.
Mr. Musk argued that leaving Twitter private would allow more freedom of speech to flow to the platform. “My strong intuitive sense is that having a highly trusted and widely inclusive public platform is extremely important for the future of civilization,” he said in an interview at the TED conference on Thursday.
He also insisted that the algorithm used by Twitter to rank its content, deciding what hundreds of millions of users see on the service every day, should be made public so that users can audit.
The concerns of Mr. Musk is shared by many Twitter executives, who have also called for more transparency about their algorithms. The company has published internal research on bias in its algorithms and funded an effort to create an open and transparent standard for social networking services.
But Twitter rejected the harsh tactics of Mr. Musk. Following a board meeting on Thursday morning, the company began exploring options to block Mr. Musk, including the poison pill and the possibility of courting another buyer.
During a meeting every Thursday, Twitter CEO Parag Agrawal tried to reassure employees about the possible shock. Although he declined to share details about the board’s plans, he encouraged employees to stay focused and not be distracted by Mr. Musk.
This is a developing story. Please check for updates again.