Twitter’s Board of Directors has unanimously adopted a “poison pill” defence in response to Tesla CEO Elon Musk’s proposal to buy the company for more than $41 billion and take it private.
Gatekeepers News reports that this move would allow existing Twitter shareholders — except for Musk to buy additional shares at a discount.
Through this, Musk’s stake in the company will be diluted and it will be harder for him to corral a majority of shareholder votes in favour of the acquisition.
This plan would take effect if the world’s richest person’s roughly 9% stake grows to 15% or more.
The poison pill injects another twist into a melodrama surrounding the possibility of Musk taking over a social media platform he described on Thursday as the world’s “de facto town square.”
According to Twitter, its plan would reduce the likelihood that any one person can gain control of the company without either paying shareholders a premium or giving the board more time to evaluate an offer. Such defences formally called shareholder rights plans, are used to prevent the hostile takeover of a corporation by making any acquisition prohibitively expensive for the bidder.
However, if it discourages his takeover attempt, the Tesla CEO could still take over the company by waging a “proxy fight” in which shareholders vote to retain or dismiss the company’s current directors.
Nevertheless, Twitter said its plan doesn’t prevent the board from negotiating or accepting an acquisition proposal if it’s in the company’s best interests.
Daniel Ives, an analyst for Wedbush Securities had said, “They’re gearing up for a battle here with Musk. They also have to give themselves time to try to find another potential buyer.”
Meanwhile, sources familiar with the matter said Twitter’s board is expected to take several more days to assess Musk’s bid and draft its response, adding that an outcome over the weekend is unlikely.
Reports further revealed that Goldman Sachs Group Inc (GS.N) has been advising Twitter’s board on its deliberations. On Friday, Bloomberg News reported that the board had tapped JPMorgan Chase Co Inc (JPM.N) as a second financial adviser.