Twitter board adopts Poison Pill strategy to thwart Elon Musk buyout offer

The Twitter takeover tussle has now advanced to another round. Twitter board on Tuesday adopted the Poison Pill strategy to protect itself from Elon Musk’s $43 billion cash buyout offer. However, in a recent Ted Talk, Elon Musk jokingly said he has a ‘Plan B’ to buy the microblogging site.

Earlier this month, Elon Musk became the biggest shareholder in Twitter Inc., with 9.2% shares, but he later declined the offer to join the Twitter board.

The SpaceX and Tesla CEO then made fresh bids to buy Twitter by placing a $43 billion cash buyout offer, but it was tactically prevented as the board adopted the Poison Pill strategy.

Poison Pill Strategy

A Poison Pill strategy is a defence tactic to thwart any hostile takeover of the target company. It allows the existing shareholders to buy additional shares at discounted rates. The move somehow prevents ownership by the majority stakeholder. Interestingly, the Poison Pill strategy will prevent any stakeholder from owning beyond 15% shares in the company. This strategy led The Vanguard Group Inc. to become the top shareholder with a 10.3% stake in the company, making Elon Musk move down to the second position.

Musk had asked on Twitter through a poll if “taking Twitter private at $54.20 (roughly Rs 4,150) should be up to shareholders, not the board.” The shares of Twitter were at $46.85 per share when Musk made this offer.

“I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy. However, since making my investment, I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company. As a result, I am offering to buy 100% of Twitter for $54.20 per share in cash, 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. My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder. Twitter has extraordinary potential. I will unlock it,” Musk said in the SEC (13D Regulatory) filing.

Musk launched fresh attacks on board members after his takeover bid failed by tweeting, “(Twitter) Board salary will be $0 if my bid succeeds, so that’s ~$3M/year (roughly Rs. 22 crore) saved right there.”

Top 5 shareholders in Twitter at present, according to Investopedia:

The Vanguard Group Inc. – 10.3 % stake

Elon Musk Revocable Trust – 9.2 % stake

Morgan Stanley – 8.4 % stake

BlackRock Inc. – 6.5 % stake

State Street Corp. – 4.5% stake

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