Twitter says poison pill makes ‘coercive’ takeover difficult
The company announced the move Friday and provided more details in a regulatory filing Monday morning. On Thursday, Tesla CEO Elon Musk unveiled an offer to buy the company for $43 billion, or $54.20 per share. He now owns about 9% of Twitter shares.
In a filing Monday with the U.S. Securities and Exchange Commission, Twitter’s board said the shareholder rights agreement would impose a “significant penalty” on any person or group of investors who acquires 15% or more of the shares of the company without the approval of the board of directors. The filing does not specifically mention Musk.
The rights agreement would give shareholders beginning April 25 the right to purchase one-thousandth of a preferred share for each common share they hold, at a price of $210. The preferred shares would have the same voting rights as a common share. This would give more votes to existing shareholders, making it harder for an investor to take control of the company.
“In broad terms, it works by imposing a significant penalty on any person or group that acquires 15% or more of the common stock without board approval,” the filing said. The effect of the agreement may be to “make more difficult or discourage a merger, takeover bid or exchange offer or other business combination involving the company,” the filing said.
Wedbush Securities analyst Daniel Ives said it was interesting that Twitter filed its “poison pill” plan before formally rejecting Musk’s offer, but he expects that rejection to come in the next 24 to 48 hours.
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“Privatizing Twitter at $54.20 should be up to shareholders, not the board,” Musk tweeted Thursday. He also said, “If Twitter’s current board of directors takes any action contrary to the interests of shareholders, it would be breaching its fiduciary duty. The liability it would thus assume would be of titanic magnitude.”
Twitter said in a filing on Thursday that Musk had offered to buy the company for more than $43 billion. Musk said Twitter “must be transformed into a private enterprise” in order to build trust with its users and better serve what he calls the “societal imperative” of free speech.
Musk called the offer final, although he didn’t provide any details on funding. The offer was non-binding and subject to financing and other conditions. He probably could have raised some of the money by borrowing billions using his stakes in Tesla and SpaceX as collateral.
Musk revealed in regulatory filings over the past few weeks that he bought Twitter shares in near-daily batches starting Jan. 31, ending up with a roughly 9% stake. Only Vanguard Group controls more Twitter shares. A lawsuit filed in federal court in New York on Tuesday alleged that Musk unlawfully delayed disclosing his stake in the social media company so he could buy more shares at lower prices.