Twitter just adopted the poison pill to defend against the Hostile Takeover attempt by Elon Musk.
Twitter just adopted the poison pill to defend against the Hostile Takeover attempt by Elon Musk.
Takeovers by Hostile Forces are nothing new around the world. Several companies have been exposed to it in the past. However, Twitter does not seem to be interested in reading it.
The Board of directors of the company is unlikely to accept billionaire Elon Musk’s proposal to take over the platform, according to The Information on Thursday.
According to another source, the corporation seems to have considered using the ‘poison pill’ strategy to thwart the effort.
On Friday, Twitter proceeded to defend itself against a Hostile Takeover proposal, which was expected. The company revealed a strategy to allow owners to buy more stock.
Before understanding in depth, Let’s get some background knowledge about the concepts.
What is a Hostile Takeover?
When an Individual or Institution acquires shares of a listen-to company to become the majority shareholder and thereby gain the ownership of the company without the real contract with the current Board or management, it is said to be a Hostile Takeover.
It is the opposite of a friendly takeover where the Board has a formal agreement with the acquirer.
What is happening on Twitter?
Over the past few weeks, Elon Musk has acquired a 9% stake in Twitter, becoming one of the company’s largest shareholders.
Next, he was provided with a seat on the Board (this was done partly because large shareholders deserved a seat on the Board and wanted to prevent Elon from going for a Hostile Takeover).
But the Tesla chief had other plans. He ran a few Twitter polls and decided that he wanted to buy out the whole company (most probably through a leveraged buyout).
So few days ago, Musk decided to make a proposal to the Board where he proposed to buy the whole company at $ 54 per share (the current price of Twitter shares-$45 per share).
The Board turned down the proposal because it was too low. This was followed by the Board of directors adopting a Poison Pill.
What is a ‘poison pill’ or ‘Rights Plan’ tactic?
A poison pill is a Hostile Takeover defense mechanism that gets triggered when an outsider tries to gain more than a certain % of the company without the approval of the Board.
It gives the existing shareholders (excluding the Hostile Acquirer) the right to buy the shares of the company at a deeply discounted price. Thereby reducing the stake of the Hostile Acquirer.
The social micro-blogging site can use the tactic to activate its shareholder’s rights plan. According to sources provided by ‘The New York Times,’ it may assist transform a Hostile Takeover into a costly and challenging procedure.
According to the article, once the plan is triggered, stockholders will be able to purchase more shares at a discounted rate.
The strategy aids in the avoidance of Hostile Takeovers by diluting an acquirer’s ownership by producing excess shares in the market. It tends to have a “pill,” making a takeover financially impossible.
As a result, Tesla CEO Elon Musk’s ownership position would eventually be reduced.
These are the terms of the poison pill in the Case of Twitter.
Suppose the rights become exercizable being a result of the triggering ownership threshold being exceeded. In that Case, each right holder (other than the person, entity, or group that triggered the Rights Plan, whose rights will become void and will not be exercizable) will be entitled to purchase additional shares of common stock with a current market value of twice the exercise price of the right at the then-current exercise price.
To counter Elon Musk’s proposal, Twitter’s Board of directors has announced a new “shareholder rights plan.” This is a big setback for the billionaire’s attempts to gain complete control of Twitter.
The offer
The Twitter Board of directors met on Thursday to evaluate the billionaire’s acquisition attempt. According to a regulatory filing, entrepreneur Elon Musk made a proposal to purchase the firm for $41.39 billion. He has set the price per share at $54.20.
Elon Musk, the billionaire, has made an official response to Twitter’s proposal to purchase a 100% share in the firm. Twitter’s Board of directors has released a new “shareholder rights plan” to stop Musk’s bid, which is the company’s latest action. This is a big setback for the billionaire’s attempts to gain complete control of Twitter.
In an official press statement, the Board of directors stated that they “approved the Rights Plan in response to an unsolicited, non-binding bid to purchase Twitter.” This is known by the term ‘a poison pill’ in the financial world. In layman’s terms, the poison pill prevents Hostile Takeovers by granting some shareholders the ability to gain more stock if a Hostile Takeover effort is made.
“The Rights Plan aims to ensure that all Twitter shareholders get the most out of their investment. The Rights Plan will make it less probable for any entity, person, or group to gain control of Twitter through open market accumulation without paying all shareholders an appropriate control premium or giving the Board enough time to make informed decisions and take actions in the best interests of shareholders “According to an official press release.
“The Rights Plan does not exclude the Board from negotiating with parties or approving an acquisition deal if the Board feels it is in Twitter’s and its shareholders’ best interests,” it said.
Musk submitted an all-cash bid to purchase a 100% interest in Twitter on Thursday for $43 billion, or $54.20 per share. Musk stated in a statement with the Securities and Exchange Commission that Twitter had “amazing potential,” which he plans to realize. “My offer is my best and final offer,” he added, adding that if it isn’t accepted, he’ll have to reevaluate his position in form of a shareholder.
Later on, Thursday, at the TED 2022 conference in Vancouver, Tesla CEO Elon Musk claimed he had a backup plan if Twitter rejects his proposal, although he didn’t go into detail. The billionaire has yet to comment on Twitter’s action.
Musk has had a lengthy history with this social media network. Following many surveys, Tesla CEO Elon Musk has proposed a slew of modifications to the platform. He was planning to join the Board of directors, but he changed his mind. The shareholders of Twitter are apparently suing Elon Musk.
Musk wrote to Twitter Chairman Bret Taylor in a letter, saying, “Since making my investment, I’ve realized that the firm, in its current form, can neither prosper nor serve this social objective. Twitter, being a private company, has to be reformed. My offer is my best and final proposal, and if it isn’t accepted, I’ll have to reconsider my position in form of a shareholder.”
On Thursday, Twitter CEO Parag Agrawal held an all-hands meeting to reassure employees that the company was not being “held captive” by reports of Elon Musk’s bid to gain the company, according to a person with knowledge of the matter.
The source, who did not want to be identified because they were not authorized to talk publicly on the topic, claimed that when Agrawal answered queries posed on the company’s Slack messaging program, he encouraged employees to stay focused and told them that “we as employees decide what happens.”
The meeting took place after it was revealed that Tesla CEO Elon Musk had proposed to acquire Facebook for $43 billion.
Agrawal informed employees that the Board was still considering Musk’s offer, but that he was constrained in what he could tell them.
One employee inquired during the question and answer session about how the business came to the decision to grant Musk a board position.
According to a segment of the discussion heard by Reuters, “Are we just going to start admitting any and all billionaires to the board?”
The Board, according to Agrawal, was acting in the best interests of shareholders.
“I have a strong belief that those who are critical of our service should have their voices heard in order for us to learn and improve,” he added.
Another employee posed a question to Agrawal, asking him to comment on Musk’s understanding of free speech and whether it agreed with Twitter’s policy.
Agrawal did not directly respond to the issue, instead stating that a large part of the company’s work is focused on improving “the health of discourse” on Twitter.
“Twitter speaks for lot more than one individual, any human,” Agrawal stated earlier in the Q&A.
A representative for Twitter declined to comment on the meeting.
On Wednesday, Musk made the proposal in a letter to Twitter’s Board of directors, which was made public in a regulatory filing on Thursday. Twitter is a micro-blogging network that has become a global method of communication for people and international leaders.
Musk hinted at the prospect of a Hostile Takeover by tweeting after his TED address on Thursday, “It would be totally inexcusable not to bring this proposal to a shareholder vote,” implying that he would circumvent Twitter’s Board and put the proposal straight to its shareholders.
The rights will become exercizable if anybody purchases 15% or more of Twitter’s outstanding common shares in a transaction not approved by the Board, widely described by the term a “poison pill” method to fend off an proposal from a potential buyer.
According to Twitter, the rights plan will expire on April 14, 2023.
What is Elon Musk’s fascination with Twitter?
Elon Musk, the mercurial entrepreneur, now says he wants to acquire Twitter altogether and take it private to restore its dedication to “free expression.” However, his proposal, which investors appeared to dismiss on Thursday, raises more problems than it answers.
He claims the service isn’t living up to its promise being a “platform for free speech,” ostensibly because it isn’t living up to its potential being a “platform for free speech.”
Musk has stated that he is not interested in profiting from Twitter, and that his motivation stems from the knowledge that “having a public platform that is maximally trustworthy and widely inclusive is incredibly important to the survival of civilization,” as he stated on Thursday.
Twitter, like other social media sites, suspends accounts for breaking content guidelines, like those related to violence, hate speech, or damaging disinformation. Its decision to suspend Donald Trump enraged the former president’s supporters.
Musk has called himself a “free speech absolutist,” but he has banned Individuals on Twitter who question or disagree with him. Tesla, his Vehicle Company, has been accused by regulators of retaliating against Black workers who spoke out against prejudice.
Elon Musk hasn’t indicated where he’ll receive the money to buy Twitter.
No. In addition, his regulatory filing states that the proposal is contingent on “expected funding completion.”
Musk said vaguely that he had “Sufficient Assets” to complete the transaction during an on-stage interview at the TED 2022 conference on Thursday, adding, “I can do it if possible.”
Can Elon Musk just buy Twitter outright from his personal wealth?
According to Forbes, Musk is the world’s wealthiest man, with a worth of about $265 billion. However, much of his wealth is invested in Tesla shares — he owns roughly 17% of the firm, which is valued at more than $1 trillion, according to FactSet — and SpaceX, his privately owned space enterprise. It’s unknown how much money Musk possesses.
“I believe this will be fairly unpleasant, and I’m not sure I’ll be able to get it,” Musk said in his interview on Thursday.
Musk may raise money by selling Tesla shares or borrowing against his equity holdings, which would damage Tesla’s stock price. However, according to Forbes, he has already pledged more than half of his Tesla stock in form of a loan security.
Would Twitter shareholders be happy with his proposal?
The stock fell below the offer price of $54.20 per share on Thursday, indicating that investors are skeptical about the deal’s success. In the past year, the stock has moved over $70, with a high of $80.75 in February 2021.
Since co-founder Jack Dorsey’s resignation in November, Twitter has been led by a new CEO, Parag Agrawal, whose early moves have included internal reorganizations. There have been no major changes to Twitter, which has fewer users than social media rivals like Facebook and TikTok despite having out-sized impact thanks to high-profile celebrity and political posts, and a loyal community of journalists. Musk is a big user, with over 81 million followers on Twitter.
Dorsey, who is still a large shareholder, hasn’t said anything about Musk’s proposal.
Twitter has simply stated that it will consider the proposal. A board representative declined to say if the Board will put in place a “poison pill” defense against a Hostile Acquisition.
How Elon Musk will probably remake Twitter?
It’s difficult to say with Musk, and speculating on the situation could be taking the man too seriously. He seems to be implying that he would reduce content monitoring by claiming Twitter is not living up to its promise being a “platform for free speech.” He has requested that the corporation cut down on spam accounts, implying increased moderation.
He recommended removing advertisements from the site (advertising are how Twitter generates money) and converting the company’s headquarters in San Francisco into a homeless shelter. He seems to support a button that allows people to edit their tweets.
What concerns does Elon Musk being an owner of Twitter raise?
Misinformation and hate speech are difficult to control on social media platforms. Musk, whose tweets have been known to incite internet bullies to mob his detractors, does not seem to be a fan of content control.
“Regulators throughout the world will be squeamish about the possible impact on free expression if Musk’s acquisition attempt succeeds,” said Global Data analyst Rachel Foster-Jones. “While Musk is obviously committed to encouraging free speech for the sake of democracy, the boundary between free speech and hate speech or disinformation is becoming increasingly blurred, and attempts to reform Twitter may quickly spin out of hand.”
In his interview with Anderson, Musk stated that Twitter is “limited by the laws of the country in which it runs,” implying that “there are certain constraints on free speech in the United States, and of course Twitter would have to adhere by those regulations.” He did, however, warn that having “tweets inexplicably promoted and downgraded” and a “black-box system” was “very risky.”
So, what’s next?
According to Third Bridge technology, media, and telecom expert Scott Kessler, Twitter may recruit bankers and consultants to assist it analyze the purchase. And there’s a chance that more purchasers may show up. “It seems that would-be strategic and/or Financial purchasers should probably engage now if they are interested in Twitter.“
Musk and Twitter
The Tesla CEO has been in the news a lot lately because of his social media posts, some of which have sparked debates.
Musk, the world’s richest man, has more than 80 million Twitter followers.
Some of his tweets, specially those on bitcoin, which caused the digital currency’s price to skyrocket, produced large swings in Tesla’s stock price.
Musk has faced a limited number of lawsuits and investigations which was a result of his tweets.
The US Securities and Exchange Commission opened an investigation when Musk’s brother, Kimbal Musk, was accused of breaking insider trading regulations when he sold $108 million worth of Tesla stock a day before Musk polled Twitter followers on whether he should sell 10% of his ownership in the firm.
In a 2018 settlement with the Securities and Exchange Commission, he agreed to have his public remarks about the company’s finances and other matters evaluated by Legal Counsel. He was ordered to pay a $40 million civil fine and to have his tweets authorized by a business lawyer.
On November 16, 10 days following Musk’s poll, the SEC issued a demand for material pertaining to financial data.
Last month, Musk stated that Twitter’s failure to adhere to free speech values harms democracy and questioned users if a new platform was required.
Musk made a stir after announcing his Twitter investment by conducting a poll asking users either they want an edit button or not.
He recently questioned whether the social media site was “dying,” citing celebrities like Justin Bieber, who has a massive following but seldom publishes.
“Most of these ‘top’ accounts tweet infrequently and publish very little material,” the Tesla CEO wrote with a list of the ten most popular profiles, which includes himself at number eight with 81 million followers.
“Is Twitter doomed?” he wondered.
Musk joked about dropping the “w” from Twitter’s name and transforming its San Francisco headquarters into a homeless shelter “because no one shows there anyhow” in other weekend tweets.
He urged that Twitter’s major source of revenue, advertisements, be removed.
Musk’s proposal would be ‘seriously reviewed’ by the Board, according to Twitter.
Twitter’s Board of directors will consider Tesla CEO Elon Musk’s “unsolicited, non-binding” bid to buy the social media business, according to the company.
“The Twitter Board of Directors will carefully analyze the proposal to decide the course of action that it feels is in the best interests of the Company and all Twitter investors,” Twitter said in response to Musk’s offer.
Elon Musk is ready with ‘Plan B’ if Twitter rejects his proposal.
Elon Musk, the CEO of Tesla, indicated on Thursday that if the Board of Twitter rejects his proposal to gain the ownership of the entire company, he has a “Plan B,” according to a local media site.
Elon Musk’s aggressive proposal to purchase Twitter will be discussed at an emergency “all-hands meeting with staff” at 2 p.m. (local time) on Thursday, according to Twitter.
Elon Musk has stated that if the Twitter board of directors rejects his proposal to buy the firm, he has a “plan B,” according to The Spectator Index.
“Will do everything possible to keep as many stockholders in a privatized Twitter as the law allows,” he tweeted.
He tweets, “Interesting.” He claims that Twitter is the global forum for free communication and that it is important for a functional democracy. Please allow me to ask two questions. What percentage of Twitter does the Kingdom control, both directly and indirectly? What are the opinions of the Kingdom on journalistic freedom of expression?
According to reports in the media, Twitter officials have called an emergency “all-hands meeting with staff” to address Tesla CEO Elon Musk’s astronomical USD41.39 billion bid to buy the site.
On Thursday, Twitter announced that its Board of directors will consider Tesla CEO Elon Musk’s unsolicited, non-binding bid to buy the social media business.
In a statement, Twitter stated, “The Twitter Board of Directors will carefully evaluate the proposal to decide the course of action that it feels is in the best interest of the Company and all Twitter investors.”
The proposal was made in an amended 13D filing earlier today by the world’s richest man. Musk made a “best and last” offer to buy Twitter outright for USD 41.39 billion, or USD 54.20 per share in Cash.
“I invested in Twitter because I believe it has the potential to be a global forum for free expression, and I believe that free speech is a social requirement for a functioning democracy,” Musk said in his filing.
“However, after making my investment, I’ve come to recognize that the firm, in its current form, can neither prosper nor serve this societal necessity,” he stated.
Musk’s newest approach toward Twitter comes only days after he declined a position on the Board of directors after purchasing a 9.2% interest in the micro-blogging network.
edited and proofread by nikita sharma
