Twitter readies ‘poison pill’ defence in response to Elon Musk’s hostile takeover bid
Twitter stated Friday that its board of administrators has unanimously adopted a “poison tablet” defence in response to Tesla CEO Elon Musk’s proposal to purchase the corporate for greater than $43 billion US and take it non-public.
The transfer would permit present Twitter shareholders — aside from Musk — to purchase extra shares at a reduction, thereby diluting Musk’s stake within the firm and making it tougher for him to corral a majority of shareholder votes in favour of the acquisition.
Twitter’s plan would take impact if Musk’s roughly 9 per cent stake grows to fifteen per cent or extra.
The poison tablet injects one other twist right into a melodrama surrounding the opportunity of the world’s richest particular person taking on a social media platform he described Thursday because the world’s “de facto city sq..”
Twitter stated its plan would cut back the chance that anyone particular person can acquire management of the corporate with out both paying shareholders a premium or giving the board extra time to judge a proposal. Such defences, formally known as shareholder rights plans, are used to forestall the hostile takeover of a company by making any acquisition prohibitively costly for the bidder.
To the shock of many, Elon Musk supplied to purchase Twitter in a deal price greater than $43 billion US. Musk defined his supply was about ‘the way forward for civilization,’ throughout an look in Vancouver. 1:58
Even when it discourages his takeover try, Musk may nonetheless take over the corporate by waging a “proxy combat” through which shareholders vote to retain or dismiss the corporate’s present administrators. Twitter stated its plan does not forestall the board from negotiating or accepting an acquisition proposal if it is within the firm’s finest pursuits.
“They’re gearing up for a battle right here with Musk,” stated Daniel Ives, an analyst for Wedbush Securities. “In addition they have to provide themselves time to attempt to discover one other potential purchaser.”
Musk has supplied to purchase the corporate outright for greater than $43 billion US, saying it “must be remodeled as a non-public firm” to be able to construct belief with its customers and do higher at serving what he calls the “societal crucial” of free speech.
“Having a public platform that’s maximally trusted and broadly inclusive is extraordinarily vital to the way forward for civilization,” he stated throughout an onstage interview on the 2022 TED conference Thursday in Vancouver, simply hours after his bid was introduced.
With about 82 million Twitter followers, Musk is each a prolific person of the platform and a vocal critic of the measures it has taken to limit accounts that unfold misinformation or amplify violent rhetoric and hate speech. He stated Thursday he is against everlasting person bans — essentially the most well-known of which is Twitter’s suspension of former President Donald Trump’s account after the Jan. 6 Capitol riot.
Musk revealed in current regulatory filings that he’d been shopping for Twitter shares in virtually every day batches beginning Jan. 31, ending up with a stake of about 9 per cent. Solely Vanguard Group controls extra Twitter shares. A lawsuit filed Tuesday in New York federal courtroom alleged that Musk illegally delayed disclosing his stake within the social media firm so he may purchase extra shares at decrease costs.
After Musk introduced his stake, Twitter shortly supplied him a seat on its board on the situation that he would restrict his purchases to not more than 14.9 per cent of the corporate’s excellent inventory. However the firm stated 5 days later that Musk had declined.
Ives stated Twitter’s poison tablet path is a predictable defensive maneuver however might be seen as a “signal of weak spot” for the corporate on Wall Avenue.
Musk may attempt to combat the measure in courtroom, however “no courtroom has overturned a poison tablet within the final 30 years,” stated Columbia College regulation professor John Espresso. Rallying shareholders to kick out the board may be extra doable but additionally presents challenges to Musk, Espresso stated.
Resistance to Musk’s supply
Musk’s supply already confronted resistance earlier than Twitter threw its Friday counterpunch.
A Saudi prince who’s amongst Twitter’s main shareholders scoffed at Musk’s supply in a Thursday tweet. Al Waleed bin Talal stated he would reject Musk’s overtures as a result of he did not imagine $43 billion US “comes near the intrinsic worth of Twitter, given its progress prospects.” The prince punctuated the tweet with one other one from 2015 disclosing his Kingdom Firm had raised its stake in Twitter to five.2 per cent — about half of what Musk now holds.
Whereas Musk’s $54.20 US per-share supply is sort of 40 per cent better than Twitter’s inventory value earlier than he disclosed his big funding, it is nonetheless far under the height closing value of $77.63 US reached lower than 14 months in the past. At the moment, Twitter was valued at about $62 billion US.
Musk responded to the prince with a tweet asking what number of Twitter shares he holds after which made what might have been a veiled reference to the 2018 homicide of journalist Jamal Khashoggi that was tied to Saudi Arabia’s Crown Prince Mohammed bin Salman. “What are the Kingdom’s views on journalistic freedom of speech?” Musk requested in a Thursday tweet.
In an indication that traders are skeptical about Musk’s supply, Twitter’s inventory fell within the first day of buying and selling after the takeover bid was introduced Thursday — precisely the alternative of what an approving market response seems like. The inventory markets have been closed Friday for the Good Friday vacation. Twitter stated it plans to reveal extra particulars of its shareholder plan in an upcoming regulatory submitting.
One other outspoken billionaire, Dallas Mavericks proprietor and tech investor Mark Cuban, weighed in on Twitter to share his principle that Musk is making his bid to goose the corporate’s inventory value so he can promote his stake at a revenue. Utilizing a profane time period, Cuban additionally postulated Musk is utilizing the bid to torment the U.S. Securities and Trade Fee, the inventory market regulatory company that fined Musk $20 million US in 2018 after he tweeted a couple of potential buyout of Tesla that by no means materialized.
In Thursday’s TED occasion, Musk made it clear he’s nonetheless incensed with the SEC and cursed the regulators with a profanity.
