On Friday, Twitter’s board indicated it would not proceed quietly after Musk’s proposal to buy the company. Twitter is trying to thwart the attempt to ransom billionaire Elon Musk with a “poison pill”, a financial tool that companies have been using against unwanted suitors for decades. On Thursday, Musk offered to buy Twitter with the revelation coming just days after Tesla CEO announced he would no longer serve on the social networking company’s board. He offered $ 54.2 per share on Twitter, calling the price his best and latest bid. On Friday, Twitter’s board indicated it would not proceed quietly, saying any acquisition of more than 15 percent of the company’s shares without its approval would trigger a plan to flood the stock market and make a much bigger takeover. difficult.
What should poison pills do?
The ingredients of each poison pill are different, but they are all designed to enable corporate boards to flood the market with so many new stocks that the acquisition becomes prohibitively expensive. The strategy became popular in the 1980s, when public companies were pursued by corporate raiders such as Carl Icahn – now more commonly described as “activist investors”. Twitter did not disclose the details of its poison pill on Friday, but said it would provide more information in a forthcoming filing with the Securities and Exchange Commission, which the company delayed because public markets were closed on Friday. Musk currently owns about 9 percent.
Can a poison pill be a bargaining chip?
Although supposed to help prevent a spontaneous takeover, poison pills often open the door to further negotiations that may force a bidder to sweeten the deal. If a higher price makes sense for the dashboard, a poison pill can simply be discarded along with the resentment it caused, paving the way for a sale to be completed. Twitter left its door open, stressing that its poison pill would not prevent the board from “getting involved with parties or accepting a takeover bid” at a higher price. Adopting a poison pill also often leads to lawsuits claiming that a corporate board and management team use tactics to hold their jobs against the interests of shareholders.
How did Musk react to the Twitter announcement?
Musk, with 82 million followers on Twitter, had no immediate reaction to the company’s poison pill. But on Thursday he showed that he was ready to go to court. “If the current Twitter board takes action against the interests of shareholders, they will be violating their duty of trust,” Musk wrote on Twitter. “The responsibility they would take would be titanic.” Musk has publicly stated that his $ 43 billion offer is his best and final offer for Twitter, but other corporate suitors have made similar statements before finally taking the reins. With an estimated fortune of $ 265 billion, Musk seems to have deep enough pockets to increase his supply, although he is still working on how to finance the proposed purchase. Musk also questioned Saudi Arabia’s role on Twitter Inc. after King Alwaleed bin Talal posted on Twitter his opposition to the billionaire businessman offering to buy the social media company. The prince wrote on Twitter on Thursday that Musk’s offer does not approach the “intrinsic value” of Twitter. “As one of Twitter’s largest and long-term shareholders, @Kingdom_KHC and I reject this offer,” the prince said, referring to the Saudi Arabia-based Kingdom Holding Company. Musk responded to the tweet, asking how much of Twitter, directly and indirectly, belongs to Saudi Arabia. “What are the Kingdom’s views on journalistic freedom of speech?” added Musk.
