Twitter (TWTR) has adopted a strategy to shield the company from hostile takeover bids like the
one it received from Elon Musk.
Twitter’s board has set up a shareholder rights plan, exercisable if a party acquires 15% of the
stock without prior approval. The plan seeks to ensure that anyone taking control of Twitter
through open market accumulation of stock pays all shareholders an appropriate control
premium, according to a statement issued by the company.
Twitter enacted the plan to buy time after Elon Musk, the chief executive officer of electric
vehicle maker Tesla (TSLA), offered to buy Twitter for $43 billion U.S. and take the company
private.
A poison pill defense strategy allows existing shareholders to purchase additional shares at a
discount, effectively diluting the ownership interest of the hostile party. Poison pills are common
among companies under fire from activist investors or in hostile takeover situations.
Twitter’s board of directors wants time to analyze and negotiate any deal with Musk or other
suitors, the company said.
“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 company said in a news release.
Musk offered $54.20 U.S. a share in cash for Twitter, valuing the social media company at $43
billion U.S. Musk, who said it was his “best and final” offer, had already accrued a stake of more
than 9% in Twitter.
At least one prominent investor said Musk’s offer was too low and the market reaction appeared
to agree. Saudi Arabia’s Prince Alwaleed bin Talal said the deal doesn’t “come close to the
intrinsic value” of the popular social media platform.
Twitter shares dropped 1.7% on news of Musk’s takeover offer, reflecting the market’s view that
the deal is likely to be rejected or too low. Musk first disclosed his Twitter stake of more than 9%
on April 4, making him the largest individual investor in the company.