Twitter’s board has approved a “poison pill” to prevent a hostile takeover in response to Elon Musk’s bid to buy the firm. According to some American media. “The company on Friday adopted a poison pill that makes it difficult for him to increase his stake beyond 15%,” writes the Wall Street Journal. In a press release, Twitter said its board of directors unanimously adopted the rights plan following an unsolicited, non-binding proposal to acquire Twitter.
In the space of a week, Elon Musk would have put himself in position to potentially organize a hostile operation once morest Twitter on one of the world’s largest social media platforms, Twitter. Elon Musk reportedly filed documents last Tuesday showing he spent $2.8 billion to take a 9% stake in Twitter, becoming the company’s largest individual shareholder. Soon following, Twitter announced that he would serve on the company’s board of directors. The stock price jumped more than 20% when Musk’s stake was announced, and everyone involved in the company began to think regarding how his stake would change things.
“I wonder if Musk was thinking well, my God! A hostile takeover,” exclaims Stephen Diamond, associate professor of law at Santa Clara University. “For those of you not poisoned by an obsession with corporate finance, a hostile takeover is offering a bundle of money to buy a company without the cooperation of the company’s management. Usually, when someone wants to buy a company and privatize it, they consult with the management of the company, set a price and try to please people. You know, a whole seduction ritual. “If you’re serious regarding this kind of thing, you arrange the funding in advance,” says Diamond, who notes that Musk hasn’t. Morgan Stanley advises Musk, and I imagine they talked to him regarding all of this, although no one knows if Musk listened. »
The rights plan is intended to allow all shareholders to realize the full value of their investment in Twitter. 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 leaving the board to control. directors enough time to make informed decisions and take action in the best interests of shareholders.
The Rights Plan does not preclude the Board of Directors from engaging with parties or accepting an acquisition proposal if the Board of Directors believes it is in the best interests of Twitter and its shareholders. .
The Rights Plan is similar to other plans adopted by public companies in comparable circumstances. Under the Rights Plan, rights will be exercisable if an entity, person or group acquires beneficial ownership of 15% or more of Twitter’s outstanding common stock in a transaction not approved by the Board. .
If the rights are exercisable as a result of crossing the triggering ownership threshold, each right will entitle its holder (other than the person, entity or group triggering the rights plan, whose rights will become void and cannot be exercised) to purchase, at the current exercise price, additional common shares having a current market value of twice the exercise price of the right.
Elon Musk made a controversial offer to buy Twitter, saying that the company has extraordinary potential and that he is the right person to unlock it. Twitter CEO Parag Agrawal told employees on Thursday that the company was still evaluating Elon Musk’s $43 billion bid to buy the company and take it private, setting the stage for a potentially long feud with the richest person in the world.
Agrawal embarked on a 25-minute question-and-answer session with employees on Thursday, according to an attendee. He didn’t say when the board would have a response to Musk’s offer or which side he leaned on, which frustrated some who had been waiting for a more detailed explanation. The board will follow a “rigorous process” and make a decision “in the best interests of our shareholders”, he said.
Agrawal, who replaced Jack Dorsey as Twitter CEO last November, addressed employee concerns regarding the social network’s future if Musk were to take it over. At least one employee asked regarding a possible layoff, which Agrawal said would not be dictated by individual performance reviews. In response to another question regarding what would happen to employee stock options if Twitter was taken private, he said it was too early to speculate.
Ahead of the meeting, Musk had criticized the possibility of board action once morest the deal, saying it “would be utterly indefensible not to put this offer to a shareholder vote.” In an interview earlier today at TED 2022 in Vancouver, Musk said his offer wasn’t regarding making money and he didn’t care regarding the economics at all. Instead, he said he wanted Twitter to protect “free speech” and open its algorithm to outside scrutiny.
The “poison pill,” as it’s known in corporate jargon, gives existing Twitter shareholders time to buy additional shares at a discount, diluting Musk’s stake. Indeed, this measure aims to prevent anyone, including Musk, from building up a stake of more than 15% in the company.
A “poison pill” gives existing shareholders the ability to purchase additional shares of the company at a reduced price, which has the effect of diluting the stake of the person or party seeking to buy the company. Musk revealed a 9.2% stake in Twitter earlier this month.
He then announced that he was joining the company’s board of directors and began proposing several changes to the platform, including turning the company’s headquarters into a homeless shelter.
Musk has repeatedly said he thinks Twitter “doesn’t adhere to free speech principles,” and even offered to create a rival platform, on which “free speech and adherence to freedom of expression have absolute priority. He then backed out of joining the board and offered to buy the company for $54.20 a share, though he didn’t specify how he intended to pay.
Responding to reports that Twitter was considering a poison pill, Musk wrote on Thursday, “If Twitter’s current board takes action contrary to the interests of shareholders, it would be breaching its fiduciary duty. The responsibility they would thus assume would be of titanic magnitude. Musk also polled Twitter users on whether his offer should be put to a shareholder vote.
Even before Friday, Twitter had regulations in place that “might have the effect of making more difficult, delaying or preventing an acquisition deemed undesirable by our board of directors,” the company said in an SEC filing. February 2022. This includes “a ranked board of directors whose members serve staggered three-year terms” and the ability to “authorize ‘blank’ preferred stock, which might be issued by our board of directors without shareholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock”.
Source : PR Newswire
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Elon Musk set to launch hostile operation once morest Twitter following board seat deal fell through
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