The Tesla owner and multi-billionaire Ellon Musk has recently offered to buy the entire Twitter company for $40 billion.
His offer now causes major havoc among its major shareholders, with this, the Directors are deploying defensive measures to prevent him from taking over the company.
The social media company board of Twitter Inc. adopted a measure that would shield it from hostile acquisition bids, taking steps to thwart billionaire Elon Musk.
A poison pill defense strategy allows existing shareholders the right to purchase additional shares at a discount, effectively diluting the ownership interest of the hostile party. Poison pills are common among companies under fire from activist investors or in hostile takeover situations.
According to an NBC News report:
On Friday, Musk’s takeover chances grew slimmer when Twitter’s board unanimously adopted a poison-pill defense, allowing shareholders to buy more stock at a discount which could force Musk to pay an even higher price to take over the company. Still, a pathway to purchasing Twitter is open to Musk if he can afford it, and he has expressed serious interest.
During a press release, Twitter said the limited duration Rights Plan that is set to trigger Musk’s share grows to 15 percent or more, be in effect until May of 2023:
The Rights Plan is intended to enable 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 gains control of Twitter through open market accumulation without paying all shareholders an appropriate control premium or without providing the Board sufficient time to make informed judgments and take actions that are in the best interests of shareholders.
The Rights Plan does not prevent the Board from engaging with parties or accepting an acquisition proposal if the Board believes that it is in the best interests of Twitter and its shareholders.
While the Rights Plan will raise the cost of any takeover attempt, there would still be a huge possibility for Musk to take over if he assembles enough shareholder support to vote out Twitter’s current directors.
Also, the former chairman of the Securities & Exchange Commission has released a previous warning that the Biden Administration could try to block Musk’s takeover attempt.