In a bid to thwart attempts by billionaire investor-inventor Elon Musk to take over the company, Twitter Inc. has adopted a measure that would shield it from hostile acquisition bids.
Two days after Elon Musk made an offer to buy 100 per cent shares of Twitter Inc. to take the company private and make it a bastion of free speech, Twitter Inc.’s board has come up with a new plan to ensure that no one takes control of Twitter through the open market accumulation of shares.
The company has adopted the ‘poison pill’ strategy in which the rights will become exercisable if anyone acquires ownership of 15% or more of Twitter’s stock in a transaction not authorised by the board. The micro-blogging tech company implemented a limited-duration shareholder rights plan to protect itself from billionaire entrepreneur Elon Musk’s $43 billion cash takeover offer.
The plan seeks to ensure that anyone taking control of Twitter through open market accumulation pays all shareholders an appropriate control premium.
“The Rights Plan 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 company said.
A poison pill defence strategy allows existing shareholders the right to buy more shares at a discounted price, which dilutes the ownership interest of the hostile party. Poison pills are common among companies when faced with hostile takeover situations.
According to Twitter officials, Twitter went for this strategy to buy time so that they could analyse and negotiate any deal. They may still accept Elon Musk’s offer, an insider was quoted as saying.
Elon Musk offers to buy Twitter, Saudi Prince reject
On Thursday, the Tesla Inc. chief executive officer Elon Musk offered to buy Twitter at $54.20 a share in cash, valuing the social media company at $43 billion. In his SEC disclosure, Musk had said he has made his “best and final” offer after accrued a stake of more than 9% in Twitter earlier this year.
In response, Twitter’s board met on Thursday to review Musk’s proposal to determine if it was in the best interest of the company and all of its shareholders.
However, hours after Tesla CEO Elon Musk had offered to buy 100% shares of Twitter, Saudi Arabian billionaire businessman al-Waleed bin Talal had refused to sell his stake of 5.2% in the micro-blogging platform. Talal cited the future growth prospects of Twitter and low share value for turning down the offer of Elon Musk.
Amidst all the noise, Vanguard funds, an American investment advisor registered in Malvern, Pennsylvania, replaced Elon Musk as Twitter’s highest shareholder on Friday. Vanguard funds have increased their holding in Twitter to 10.3% of the social media giant’s stock, making it the largest shareholder of the company.
