On Friday, Twitter unveiled a counterattack against Elon Musk’s unwelcome takeover proposal, introducing a poison pill to thwart Musk’s $43 billion takeover attempt.
The maneuver, formally known as a shareholder rights plan, essentially allows current shareholders to purchase more stock in the company at a discount, presenting Musk with an unwelcome “pill,” implying that his shares would be diluted and his purchase would become far more expensive and less appealing. Any attempt to buy Twitter would require Musk to engage directly with the company’s board of directors.
The poison pill will take effect once a person or entity acquires 15% or more of Twitter’s shares, according to an announcement from Twitter’s board of directors, which noted the plan will be in place until next April.
Musk, the largest individual Twitter shareholder, holds about 9% of company stock, but he has made an offer to buy the company outright.
With the poison pill plan now in place, Twitter is preemptively defending itself against the possibility of Musk upping his stake in the company.
“The poison pill puts a temporary roadblock in front of Musk going forward,” said corporate governance expert Edward Rock, who teaches at New York University’s School of Law. “It gives the board a chance to evaluate the bid, whether it makes sense to sell the company, and if they are going to sell the company, whether it makes sense to sell the company to him.”
Musk did not return NPR’s request seeking comment. Speaking at a conference in Vancouver on Thursday, Musk said he has a “Plan B” if his takeover attempt was not successful, but he did not elaborate.
At the event, Musk portrayed his ambitions to own Twitter in grandiose terms, saying “civilizational risk” would be decreased if there was more public trust in Twitter.
The poison pill plan announced on Friday will likely complicate and delay any potential Musk acquisition, though it does not rule it out forever.
Twitter said the move is aimed at enabling investors to “realize the full value of their investment” by making it less likely that Musk would still be immediately interested in a hostile takeover.
Under the terms of the plan, Twitter can engage with parties interested in buying the company, or even accept an acquisition proposal, if a bid is in the “best interests” of the company and its shareholders.
Rock, of NYU Law, said Musk will show he is serious about buying Twitter if one of two things happens: He shows how exactly he plans on financing the takeover, since Musk did not reveal that in his Securities and Exchange Commission filing, or he launches a proxy contest to try to replace members of Twitter’s board in response to the poison pill plan.
“Absent that, he’s not going to acquire the company,” Rock said. “And people can just write it off like some of his other Twitter storms.”