Twitter said on Friday that its board of directors had unanimously agreed to defend the “poison pill” in response to a proposal by Tesla CEO Elon Musk to buy the company for more than $ 43 billion and make it private.
The move will allow existing Twitter shareholders – with the exception of Musk – to buy additional shares at a discount, thus diluting Musk’s stake in the company and making it harder for him to win a majority of shareholders’ votes in favor of the acquisition. .
Twitter’s plan will take effect if Musk’s stake rises from about nine percent to 15 percent or more.
The poison pill injects another twist in a melodrama about the possibility of the world’s richest man taking over a social media platform, which he described on Thursday as the world’s “de facto town square”.
Twitter said its plan would reduce the likelihood that anyone would gain control of the company without paying a shareholder premium or giving the board more time to evaluate an offer. Such protections, officially called shareholder rights plans, are used to prevent a hostile takeover of a corporation, making any acquisition prohibitively expensive for the offeror.
WATCH Elon Musk seeks to buy Twitter in a hostile takeover:
Elon Musk offers $ 43 billion to buy Twitter in a hostile takeover
To the surprise of many, Elon Musk offered to buy Twitter in a deal worth more than $ 43 billion. Musk explained that his proposal was for the “future of civilization” during a performance in Vancouver. 1:58
Even if this discourages his takeover attempt, Musk can still take over the company by waging a “proxy battle” in which shareholders vote to retain or dismiss the company’s current directors. Twitter said its plan did not prevent the board from negotiating or accepting a takeover bid if it was in the company’s best interests.
“They are preparing for a battle here with Musk,” said Daniel Ives, an analyst at Wedbush Securities. “They also need to take the time to try to find another potential buyer.
Musk offered to buy the company directly for more than $ 43 billion, saying it “needs to be transformed as a private company” to build trust with its customers and do better at what it calls. the public imperative “of free speech.
“Having a publicly trusted and inclusive public platform is crucial to the future of civilization,” he said in an interview on the stage of the 2022 TED conference in Vancouver on Thursday, just hours after the candidacy was announced. mu.
With about 82 million Twitter followers, Musk is both a prolific user of the platform and an outspoken critic of the measures it has taken to restrict accounts that spread misinformation or increase violent rhetoric and hate speech. He said Thursday that he was opposed to permanent bans on consumers – the most notable of which was the suspension by Twitter of former President Donald Trump’s account following the January 6 Capitol riots.
TED CEO Chris Anderson, left, interviews Elon Musk during the last TED 2022 session in Vancouver on Thursday. (Stacy McChesney / TED)
Musk has revealed in recent regulatory documents that he has bought shares on Twitter almost every day, starting Jan. 31, ending with a stake of about nine percent. Only the Vanguard Group controls more Twitter shares. A lawsuit filed Tuesday in federal court in New York alleges that Musk illegally delayed the disclosure of his stake in a social media company so he could buy more shares at lower prices.
After Musk announced his stake, Twitter quickly offered him a seat on the board, provided it limited its purchases to no more than 14.9% of the company’s outstanding shares. But the company said five days later that Musk had refused.
Ives said the path of Twitter’s poison pills was a predictable defensive maneuver, but could be seen as a “sign of weakness” for the Wall Street company.
Musk may try to fight the measure in court, but “no court has overturned the poison pill in 30 years,” said Columbia University law professor John Coffey. Bringing together shareholders to throw off the board may be more feasible, but it is also a challenge for Musk, Coffee said.
Resistance to Musk’s proposal
Musk’s proposal has already met with resistance before Twitter launched its counterattack on Friday.
The Saudi prince, who is one of Twitter’s main shareholders, scoffed at Musk’s tweet on Thursday. Al-Walid bin Talal said he would reject Musk’s initiatives because he did not believe that $ 43 billion was “close to the intrinsic value of Twitter, given its growth prospects.” The prince tweeted with another from 2015, revealing that his company Kingdom has increased its share of Twitter to 5.2% – about half of what Musk now owns.
While Musk’s offer of $ 54.20 per share was nearly 40 percent higher than Twitter’s share price before revealing its huge investment, it is still well below its peak closing price of $ 77.63. reached less than 14 months ago. At the time, Twitter was valued at about $ 62 billion in the United States.
The Twitter headquarters can be seen in San Francisco on January 11. (Stephen Lam / Reuters)
Musk tweeted to the prince, asking how many shares he owns on Twitter, and then did something that may have been a veiled reference to the 2018 assassination of journalist Jamal Hashoghi in connection with Saudi Crown Prince Mohammed bin Salman. What are the Kingdom’s views on journalistic freedom of speech? Musk tweeted on Thursday.
As investors are skeptical about Musk’s offer, Twitter shares fell on the first day of trading after the takeover bid was announced on Thursday – just the opposite of what the market’s approval response looks like. The exchanges were closed on Friday for Good Friday. Twitter said it plans to reveal more details about its shareholder plan in an upcoming regulatory bid.
Another outspoken billionaire, Dallas Mavericks owner and technology investor Mark Cuban, took to Twitter to share his theory that Musk was making an offer to raise the company’s share price so he could sell his stake at a profit. Using an obscene term, Cuban also postulated that Musk used the proposal to torture the US Securities and Exchange Commission, the stock market regulatory agency that fined Musk $ 20 million in 2018 after he tweeted about potential buying Tesla, which never happened.
At the TED event on Thursday, Musk made it clear that he was still angry with the SEC and cursed regulators with curses.
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