The Twitter Board Is Adopting A “Poison Pill” Defense To Block Elon Musk’s Takeover

April 15, 2022 / Posted by:

Everything I know about business and billionaires I learned through watching Succession and The Drop Out, both of which (coincidentally?) feature Alan Ruck. Unfortunately, this Ruck-centric financial knowledge is limited, so bear with me as I attempt to dive into the Elon Musk vs. Twitter mess.

Last week Elon Musk became Twitter’s majority shareholder when he bought 9% of shares in the company. A couple of days ago we learned that he’s being sued by Twitter shareholders for failing to disclose his 9% stake on time. Then, yesterday, Elon shocked the world by offering to buy Twitter for $43 billion in cash. He wants to transform it into a private company. A Musk-run Twitter would, allegedly, do better at serving the “social imperative” of free speech (“YAAAAAS” -Donald Trump). That brings us to today’s news: The Wall Street Journal reports that Twitter has adopted a “poison pill” plan in an attempt to block Elon’s dastardly hostile takeover.

Alas, a poison pill is not literally a poison pill. Sigh! It’s a defensive strategy, also known as a shareholders’ rights plan. Deadline says this approach makes “hostile takeovers more expensive and complicated for a buyer” and allows existing shareholders the right to buy additional shares of Twitter at a discount, “effectively diluting the ownership interest of a new, hostile party.” So Elon’s stake is rendered less valuable and it’ll be harder for him to control a majority of shareholder votes in favor of his acquisition. This would take effect if Elon’s 9% stake grows to 15% or more. The Associated Press says the move “injects another twist into a melodrama,” and it’s essentially Twitter “gearing up for a battle”:

Even if it discourages his takeover attempt, Musk could still take over the company by waging a “proxy fight” in which shareholders vote to retain or dismiss the company’s current directors. Twitter said the plan doesn’t prevent the board from negotiating or accepting an acquisition proposal if it’s in the company’s best interests.

“They’re gearing up for a battle here with Musk,” said Daniel Ives, an analyst for Wedbush Securities. “They also have to give themselves time to try to find another potential buyer.”

Columbia University law professor John Coffee (cream and sugar, please), says that Elon could fight Twitter’s strategy in court, but “no court has overturned a poison pill in the last 30 years.” Analyst Daniel Ives says that Twitter’s poison pill is a classic defensive maneuver, but, on Wall Street, it could be seen as a “sign of weakness.” So it sounds like Twitter’s shareholders are gonna have to throw a big party with a bunch of coke and strippers to prove that they’re still badasses.

Once I went on a date with a guy who sold Teslas, and he told me that the gossip at work suggested Elon was a giant doofus asshole who nobody actually respected. And while that may sound like a big ol’ pile of “duhhhh,” I still wouldn’t trust the Tesla-seller as far I could throw him. At the end of our date, he said he had a fantastic time, kissed me, and promised he’d text. After that? Nada. Ghosted. Fuck you, James Tinder!

Pic: INSTARImages

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