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Musk has said on more than one occasion that Twitter limits freedom of expression on its platform
Twitter’s board of directors has taken defensive measures to counter billionaire Elon Musk’s desire to acquire the social networking site for $43 billion.
The board of directors adopted what is known as a “limited-term shareholder rights plan”, also known as a “poison pill”.
This plan prohibits the purchase by one owner of more than 15 percent of the company’s shares, which is achieved by providing opportunities for investors to purchase additional shares at a reduced price.
Twitter explained its defense plan to the US Securities and Exchange Commission, and issued a statement explaining that it needed that plan due to Musk’s “unsolicited, non-binding takeover of Twitter” offer.
The takeover offer is considered “hostile” when a company wants to acquire another company contrary to the desire of the latter’s management, which is represented in the case of Twitter by the board of directors of the company that owns the social networking platform.
Josh White, a financial economist with the US Securities and Exchange Commission, told the BBC that the “poison pill” was among “the last lines of defense companies can resort to to defend themselves against hostile takeovers”.
“We also call it the nuclear option,” he added, referring to it as the last option for defence.
White said Twitter’s board of directors made it clear that it “does not see the offer as providing value that is appropriate for the company.”
“Because Musk indicated he was not willing to negotiate a higher price, Twitter’s board of directors went ahead with the poison pill,” he added.
The US Securities and Exchange Commission expert noted that the negotiation style used by Musk was a surprise, because if the ultimate goal of the offer was to acquire Twitter, this would not be the “right way” to achieve it.
White continued, “I think if (Musk) is really serious about trying to acquire, he should start at a price and leave the door open for negotiation.”
Twitter’s defense plan is set to remain until April 14 next year.
Parag Agrawal, Twitter’s chief executive, said the company would not be “hostage” to the offer.
Meanwhile, Elon Musk said, during a TED2022 meeting in Vancouver, “I’m not sure I’ll be able to acquire it,” stressing that he has a “plan B” although he did not announce any other details.
Musk announced his purchase of 9.2 percent of Twitter earlier this month, but that did not make him the largest owner of the company’s shares.
And Vanguard Asset Management revealed that its investment fund contains 10.3 percent of Twitter shares.
Musk said earlier that Twitter limits freedom of expression on its social networking platform, and echoed those allegations in his speech to the Vancouver conference.
He noted that the motivation behind the deal is to increase freedom of expression – a US constitutional right – on Twitter.