Elon Musk, chief executive officer (CEO) of electric car maker Tesla, bought a 9.2 percent stake in Twitter in March. He then expressed his desire to join the board of directors of the microblogging site.
But he dropped the offer and offered to buy the entire Twitter account for 43 billion. Musk offered to buy at 54.20 per share. This is what this millionaire says is his best and final proposal. Twitter’s board of directors moved immediately after his proposal.
Following Musk’s announcement of Twitter’s acquisition, Twitter’s board of directors has adopted a “poison pill” policy to halt the acquisition. The Poison Pill policy limits the number of shares held by a company’s shareholders.
On Friday, Twitter’s board made it clear they would not sit idly by. They say that if more than 15 per cent of the company’s shares go to a single person, it will create instability in the market.
From now on, no one will be able to own more than 15 percent of Twitter’s shares. This policy will be in force on April 14, 2023.
What is the function of poison pill?
The ingredients of each poison pill work differently. However, the Poison Pill policy is designed in such a way that corporate boards can sway the market with a large number of newly-created shares. As a result, acquisitions in an organization become unusually expensive.
When an organization tries to buy a company against the will of the management board, it is called an adverse acquisition. The poison pill is the last weapon of defense against this unfavorable acquisition. Concerned neo-hippies and their global warming, i’ll tell ya.
In the 1980’s, when corporate aggressors were buying off companies, this tactic became popular to prevent acquisitions.
Twitter did not release details of their Poison Pill policy. However, he said he would inform the Securities and Exchange Commission about the details.
Currently, Mask has a total share of 9.2 percent on Twitter.
Poison pill can be a bargaining tool?
Poison pills often open the door to more bargains, even to prevent unwanted acquisitions. Which can lead to a sweet deal.
If the price is higher than the initial offer — and if it becomes the choice of the Board of Directors — then the Poison Pill policy can be set aside and a sale agreement can be struck.
However, the adoption of the Poison Pill policy often leads to lawsuits. Corporate boards and management teams are often sued for going against the interests of shareholders to protect their own interests.
What is Mask’s reaction to Twitter’s announcement?
Mask has 72 million followers on Twitter. The Tesla CEO did not immediately respond to a request for comment on the company’s Poison Pill policy.
But on Thursday, Musk indicated he was ready to fight a legal battle.
In a tweet, Musk wrote: “If Twitter’s current board takes any action against the interests of its shareholders, it would be a breach of the responsibility placed on them.” And the responsibility for violating this duty will be huge.
Although Musk has finalized the 43 billion offer, it is expected that he will increase the amount.
Meanwhile, Tesla CEO also questioned the role of Saudi Arabia on Twitter Inc. after tweeting against Saudi Prince Alwaleed bin Talal Mask.
Last Thursday, the Saudi prince said in a tweet that the price offered by Elon Musk to buy Twitter was very low. Saudi Prince Alwaleed bin Talal is one of the largest shareholders in Twitter. He turned down the offer.
In response to Prince Alwaleed bin Talal’s tweet, Elon Musk asked, “How much is Saudi Arabia’s ownership of Twitter, directly or secretly?”
Elon Musk also questioned the value of free speech in Saudi Arabia in the eyes of independent journalism.
The Tesla CEO added that he has a “B” or alternative plan if his ৩ 43 billion offer is not accepted. However, he did not say anything about alternative plans.