Twitter readies ‘poison pill’ defence in response to Elon Musk’s hostile takeover bid


Twitter said Friday its board of directors has unanimously adopted a “poison pill” defence in response to Tesla chief executive officer Elon Musk’s proposal to buy the company and take it private.

Twitter said the move, formally called a “limited duration shareholder rights plan,” aims to enable its investors to “realize the full value of their investment” by reducing the likelihood any one person can gain control of a company without either paying shareholders a premium or giving the board more time. Poison pills are often used to defend against hostile takeovers.

Twitter’s plan would take effect if Musk’s roughly nine per cent stake grows to 15 per cent or more. Even then, Musk could still take over the company with a proxy fight by voting out the current directors. Twitter said the plan doesn’t prevent the board from engaging with parties or accepting an acquisition proposal if it’s in the company’s “best interests.”

Twitter had revealed in a securities filing Thursday that Musk offered to buy the company outright for more than $43 billion US, saying the social media platform “needs to be transformed as a private company” in order to build trust with its users.

“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.”

Tesla chief executive officer Elon Musk, right, is interviewed by TED CEO Chris Anderson at the non-profit’s 2022 session in Vancouver on Thursday. Musk has proposed to buy Twitter and take it private, prompting Twitter’s board of directors to adopt a ‘poison pill’ defence in response. (Stacie McChesney/TED )

Later on Thursday, during an onstage interview at the TED 2022 conference in Vancouver, he went even broader: “Having a public platform that is maximally trusted and broadly inclusive is extremely important to the future of civilization.”

Musk revealed in regulatory filings over recent weeks that he’d been buying Twitter shares in almost daily batches starting Jan. 31, ending up with a stake of about nine per cent. Only Vanguard Group controls more Twitter shares.

A lawsuit filed Tuesday in New York Federal Court alleges Musk illegally delayed disclosing his stake in the social media company so he could buy more shares at lower prices.

After Musk announced his stake, Twitter quickly offered him a seat on its board on the condition that he limit his purchases to no more than 14.9 per cent of the company’s outstanding stock. But the company said five days later that Musk had declined.

A poison pill path is a “predictable” defensive manoeuvre, although it could be seen as a “sign of weakness” and viewed unfavourably on Wall Street, Wedbush Securities analyst Daniel Ives said in an emailed note.

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