Twitter Board Of Directors Utilize ‘Poison Pill’ Plan Against Musk

The board of directors for social media titan Twitter has recently adopted the use of a “poison pill” in attempts to stop Tesla found and SpaceX CEO Elon Musk from going through with his plans to buy out and take over Twitter.

The board has officially adopted a “limited duration shareholder rights plan,” which lets the existing shareholders for the social media platform, except in this case Musk, a period of time to buy more shares at a sizable discount, reported Axiom this past Friday.

This is all clearly in an attempt to try and dilute the power Musk hold’s within the company and make the cost of any potential hostile takeover prohibitively high.

“A poison pill, devised by law firms in the 1980s to protect companies from corporate raiders, essentially lets a takeover target flood the market with new shares or allow existing shareholders other than the bidder to buy them at a discount,” stated the New York Times in way of explanation. “That means anyone trying to acquire the company must negotiate directly with the board.”

This poison pill will be activated as soon as “any individual or a group of people working together buy 15 percent or more of Twitter’s shares,” stated the Times.

Musk currently owns a total of 9% of the company.

In the same vein from back in 2008, Yahoo fought off its own massive takeover attempt from Microsoft by making use of this “poison pill” strategy. More recently, Kohl’s Corp., a department store chain,  made use of the strategy in February in an attempt to stop all offers that “did not adequately reflect its future growth and cash flow generation,” stated Reuters in a report.

Twitter put forth a press release on Friday that announced this new “Rights Plan.”

“Twitter, Inc. today announced that its Board of Directors has unanimously adopted a limited duration shareholder rights plan (the ‘Rights Plan’),” stated the release. “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,” continued the release. “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,” stated the platform.

“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,” stated the company. “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.”

As of writing, the new plan is slated to expire on the 14th of April, 2023.


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