Twitter announced Friday that it has decided to adopt a limited duration shareholder rights plan, known as a “poison pill,” in response to Tesla CEO Elon Musk’s $43 billion acquisition offer a day earlier—as the social media company prepares to resist a potential hostile takeover.
Here are some key facts
Twitter’s board of directors voted unanimously to adopt the shareholder rights plan, often called a “poison pill,” which is commonly used to fend off hostile takeovers by diluting shares.
Under the new plan, if any shareholder acquires more than a 15% stake in Twitter without the board’s approval, other shareholders will be allowed to add to their stakes at a discounted price.
Twitter clearly intends to resist any unwarranted takeover. This decision comes a day after Elon Musk, a billionaire in Tesla’s case made an offer of $43 billion to purchase the social media giant and make it private.
The board did note that the poison pill would not prevent it from accepting a future acquisition offer, however, as long as it is deemed to be “in the best interests of Twitter and its shareholders.”
The most important quote:
“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 a press release.
Here’s What to Watch:
Several Wall Street analysts recently downgraded Twitter stock, warning that Musk’s takeover bid puts the company in a difficult position. Stifel became one of the first to issue a sell rating on Twitter shares amid a “full blown Elon circus,” while KeyBanc analysts warn the bid could “go up in smoke” and a potential sell-off could ensue if Musk decides to cash out.
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