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Twitter board fights Musk takeover with unanimous adoption of poison pill


A pill with a skull and crossbones printed on it in an illustration of a poison pill.

Getty Images | Peter Dazeley

Twitter’s board of directors approved a poison pill to prevent a hostile takeover in response to Elon Musk’s offer to buy the firm. “The company on Friday adopted a so-called poison pill that makes it difficult for him to increase his stake beyond 15 percent,” The Wall Street Journal wrote.

In a press release, Twitter said its board unanimously “adopted the Rights Plan following an unsolicited, non-binding proposal to acquire Twitter.”

“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 announcement said.

Twitter said this move “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 new shareholder rights will be in effect for one year and will be triggered if any person, entity, or group acquires 15 percent of stock “in a transaction not approved by the Board.” Twitter further explained:

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.

Musk pushed for shareholder vote

Musk was briefly Twitter’s largest shareholder with his 9.2 percent stake until Vanguard Group upped its ownership share to 10.3 percent.

Bloomberg noted Thursday that a “poison pill defense strategy allows existing shareholders the right to purchase additional shares at a discount, effectively diluting the ownership interest of the hostile party.”

In response to news that Twitter was considering a poison pill, Musk wrote Thursday, “If the current Twitter board takes actions contrary to shareholder interests, they would be breaching their fiduciary duty. The liability they would thereby assume would be titanic in scale.” Musk also polled Twitter users about whether his offer should be voted on by shareholders.

Even before Friday, Twitter had bylaws that “could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our board of directors,” the company said in a February 2022 SEC filing. That includes “a classified board of directors whose members serve staggered three-year terms,” and the ability to “authoriz[e] ‘blank check’ preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock.”





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