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Twitter board voted unanimously to adopt rights plan
Twitter Inc (NYSE: TWTR) on Friday adopted a limited-duration shareholder rights plan, often called a “poison pill,” to protect itself from billionaire Elon Musk’s $43 billion cash takeover offer.
The social media company said that the rights plan would allow other shareholders to purchase additional Twitter shares at a discount if any person or group acquires beneficial ownership of at least 15% of the company’s outstanding common stock without the board’s approval.
The poison pill tactic is a defense strategy used to discourage a potential hostile takeover.
Moreover, buyout firm Thoma Bravo has expressed its interest to acquire the microblogging company, which is expected to compete with Tesla Musk’s offer.
“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.
However, Twitter said that the new structure would not prevent the board from accepting an acquisition offer if it deems that the bid is in the best interests of the company and its shareholders.
The new structure, which Twitter’s board of directors has unanimously adopted, is set to expire on April 14, 2023.
Twitter tales trajectory
Tesla’s CEO last week disclosed that he took a 9.2% stake in Twitter worth $2.89 billion.
Soon after his stake became public, Parag Agarwal, the chief executive of the social media company, announced plans for Musk to join the board.
However, days later, Musk reversed course and decided not to join the board. If he had joined, Musk would not be allowed to amass more than 14.9% of beneficial ownership of Twitter’s outstanding common stock.
On Wednesday, after the market closed, Musk made a bid to acquire Twitter for $54.20 per share in cash, representing an 18% premium over that day’s closing price.
“It’s a 54% premium over the day before I began investing in Twitter and a 38% premium over the day before my investment was publicly announced,” he said.
However, after a few hours of making the takeover bid, Musk turned back on his offer to buy Twitter, stating that he was “not sure” he’d be able to buy the social media company.
Picture Credit: Wired
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