By Daniel Levi
A day after Tesla CEO Elon Musk announced his plan to acquire 100% of the social media platform, Twitter’s Board of Directors has decided to adopt a “poison pill” strategy to prevent Elon Musk from taking over the platform.
The “poison pill,” as it’s called in corporate terms, gives Twitter’s existing shareholders time to purchase additional shares at a discount, thereby diluting Elon Musk’s ownership stake in the company.
In a public press release, Twitter’s board on Friday enacted a defensive measure meant to prevent Elon Musk’s $43 billion hostile takeover bid. The company adopted a limited duration shareholder rights plan, thereby enabling all shareholders to realize the full value of the company. The Rights Plan will expire on April 14, 2023.
“Twitter, Inc. (NYSE: TWTR) today announced that its Board of Directors has unanimously adopted a limited duration shareholder rights plan (the “Rights Plan”). The Board adopted the Rights Plan following an unsolicited, non-binding proposal to acquire Twitter,” the company said in a news release.
“Important: The Rights Plan will reduce the likelihood that any entity, person or group gains control of Twitter through market accumulation without paying all shareholders an appropriate control premium or without providing the Board sufficient time to make informed judgments,” the report added.
Additional information regarding the Rights Plan will be contained in a Form 8-K to be filed by Twitter with the U.S. Securities and Exchange Commission.
“Why it matters: The ‘poison pill,’ as it’s called in corporate terms, gives Twitter’s existing shareholders time to purchase additional shares at a discount, thus diluting Musk’s ownership stake,” the report added.
“Elon Musk is no longer the largest shareholder in Twitter, it emerged on Thursday after asset manager Vanguard Group increased its stake to overtake him,” the Daily Mail reported. “Vanguard now owns 10.3 percent of Twitter, while Musk owns 9.1 percent of the company, making him the largest individual shareholder.”
Below is the full release.
Twitter, Inc. (NYSE: TWTR) today announced that its Board of Directors has unanimously adopted a limited duration shareholder rights plan (the “Rights Plan”). The Board adopted the Rights Plan following an unsolicited, non-binding proposal to acquire Twitter.
The Rights Plan is intended to enable all shareholders to realize the full value of their investment in Twitter. The Rights Plan will reduce the likelihood that any entity, person or group gains control of Twitter through open market accumulation without paying all shareholders an appropriate control premium or without providing the Board sufficient time to make informed judgments and take actions that are in the best interests of shareholders.
The Rights Plan does not prevent the Board from engaging with parties or accepting an acquisition proposal if the Board believes that it is in the best interests of Twitter and its shareholders.
The Rights Plan is similar to other plans adopted by publicly held companies in comparable circumstances. Under the Rights Plan, the rights will become exercisable if an entity, person or group acquires beneficial ownership of 15% or more of Twitter’s outstanding common stock in a transaction not approved by the Board. In the event that the rights become exercisable due to the triggering ownership threshold being crossed, each right will entitle its holder (other than the person, entity or group triggering the Rights Plan, whose rights will become void and will not be exercisable) to purchase, at the then-current exercise price, additional shares of common stock having a then-current market value of twice the exercise price of the right.
The Rights Plan will expire on April 14, 2023.
Additional information regarding the Rights Plan will be contained in a Form 8-K to be filed by Twitter with the U.S. Securities and Exchange Commission.
