Twitter’s board on Friday approved plans to employ a poison pill defense to fight Elon Musk’s takeover of the company.
“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 company said in its statement.
This comes as the Tesla boss on Wednesday filed paperwork offering to buy Twitter for $43 billion in cash after acquiring a 9.2% stake in the company earlier this month. Twitter said its board of directors “unanimously adopted a limited duration shareholder rights plan” after the unsolicited offer from Musk this week to acquire the company. The rights plan will expire on April 14, 2023.
“The Rights Plan is similar to other plans adopted by publicly held companies in comparable circumstances,” the statement continued. “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.”
Known as the poison pill, it is a tactic companies use in hostile takeovers to let it offer new shares or shares at a discount to other buyers and shareholders. Twitter could use this to buy time while the board considers Musk’s proposal and any other potential offers, Mandeep Singh, analyst at Bloomberg Intelligence, previously told TheWrap.
“It is unclear whether the board officially asks or requests Elon to give a formal proposal on the changes that he wants to make in the company,” Singh said.
Musk has noted in his SEC filing this offer is his “best and final offer,” and that if rejected, he will reconsider his role as a shareholder. Reminder: He previously said he would take Tesla private, but changed his mind weeks later.
“The premium above market value that he has offered is impressive and puts pressure on the board to justify not accepting the offer,” Paul Barrett, deputy director of the NYU Stern Center for Business and Human Rights, told TheWrap. “But directors are allowed to consider factors other than how much cash a hostile bidder offers shareholders. They are allowed to consider the interests of other stakeholders, including employees.”