Twitter’s board of directors on Friday voted unanimously to use a tactic called a “poison pill” to fend off Elon Musk’s attempt to take over the company.<\/P>
In such a defensive tactic, all Twitter shareholders except Musk could buy more shares at a discount. This would dilute the world’s richest person’s stake in the company and prevent him from recruiting a majority of shareholders supporting his move.<\/P>
If Musk’s ownership in Twitter grows to 15% or more, the poison pill would go into effect.<\/P>
Musk, who earlier this week was revealed as the company’s largest individual shareholder, with 9.2% of the shares, later offered more than $43 billion, or $54.20 a share, to purchase the entire company.<\/P>
Musk’s offer would provide a substantial premium over Twitter’s current stock price of just more than $45 a share.<\/P>
Free-speech concern expressed<\/P>
When Musk made his offer, he lamented the company’s stance on free speech.<\/P>
“I believe free speech is a societal imperative for a functioning democracy,” Musk said in the filing. “I now realize the company will neither thrive nor serve this societal imperative in its current form.”<\/P>
But instead of putting Musk’s offer up for a vote with Twitter shareholders, the company’s board said Friday that it would instead offer its shareholders a chance to buy even more shares at a steep discount, effectively diluting the price of the stock.<\/P>
The plan “will reduce the likelihood that any entity \u2026 gains control of Twitter through open market accumulation without paying all shareholders an appropriate control premium,” the company said.<\/P>
The Twitter board’s plan will be effective for one year.<\/P>
As rumors of a poison pill action circulated Thursday, Musk speculated via Twitter on what might happen.<\/P>
“If the current Twitter board takes actions contrary to shareholder interests, they would be breaching their fiduciary duty,” he wrote. “The liability they would thereby assume would be titanic in scale.”<\/P>
One analyst, Dan Ives of Wedbush Securities, told the New York Post that the board’s move was a “defensive measure,” adding that shareholders would not likely view it positively.<\/P>
“We believe Musk and his team expected this poker move, which will be perceived as a sign of weakness, not strength, by the Street,” Ives told the Post.<\/P>
Josh White, a former financial economist for the Securities and Exchange Commission, told BBC that Musk’s negotiation tactics might not be the “right approach” if Musk wants to acquire the company.<\/P>
“I actually think if he was truly serious about the takeover attempt, he would have started at a price and left the window open for negotiation,” White said.<\/P>
Twitter ‘storm’?<\/P>
Edward Rock, who teaches corporate law and governance at New York University’s law school, also had doubts about whether Musk was serious about buying Twitter.<\/P>
As Rock told NPR, Musk can show he is serious by revealing how he plans to finance the takeover, which he did not show in his SEC filing, or launch a proxy contest to replace Twitter board members in response to its poison pill.<\/P>
If Musk fails to do so, Rock said, “he’s not going to acquire the company, and people can just write it off like some of his other Twitter storms.”<\/P>
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Source: Voice of America<\/P>
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