PROVIDENCE, RI – Twitter said Friday that its board of directors had unanimously adopted a “poison pill” defense in response to Tesla CEO Elon Musk’s proposal to buy the company for more than 43 billions of dollars and privatize it.
The move would allow Twitter’s existing shareholders – with the exception of Musk – to buy additional shares at a discount, diluting Musk’s stake in the company and making it harder for him to garner a majority of shareholder votes in favor of the acquisition.
Twitter’s plan would go into effect if Musk’s roughly 9% stake increases to 15% or more.
The poison pill injects another twist into a melodrama surrounding the possibility of the world’s richest person taking control of a social media platform he described on Thursday as the world’s “de facto public square”.
Twitter said its plan would reduce the likelihood that a single person could take control of the company without paying a shareholder bonus or giving the board more time to consider a bid. These defences, officially called shareholder rights plans, are used to prevent a hostile takeover of a company by making any acquisition prohibitively expensive for the offeror.
Even if that discourages his takeover bid, Musk could still take over the company by waging a “proxy battle” in which shareholders vote to retain or remove the company’s current directors. Twitter said its plan does not prevent the board from negotiating or agreeing to an acquisition proposal if it is in the company’s best interest.
“They’re preparing for a battle here with Musk,” said Wedbush Securities analyst Daniel Ives. “They also have to give themselves time to try to find another potential buyer.”
Musk has offered to buy the company for more than $43 billion, saying it “needs to be privately owned” to build trust with its users and better serve what he calls “the imperative society” of freedom of expression. .
“Having a broadly inclusive, maximum-trust public platform is extremely important for the future of civilization,” he said in an onstage interview at a TED event on Thursday, just hours later. announcement of his candidacy.
With around 82 million followers on Twitter, Musk is both a prolific user of the platform and a vocal critic of steps he has taken to restrict accounts that spread misinformation or amplify violent rhetoric and hate speech. . He said Thursday he opposes permanent user bans — the most famous of which is Twitter’s suspension of former President Donald Trump’s account after the Jan. 6 riot on Capitol Hill.
Musk revealed in recent regulatory filings that he bought Twitter shares in near-daily batches starting Jan. 31, ending up with a roughly 9% stake. Only Vanguard Group controls more Twitter shares. A lawsuit filed in federal court in New York on Tuesday alleged that Musk unlawfully delayed disclosing his stake in the social media company so he could buy more shares at lower prices.
After Musk announced his participation, Twitter quickly offered him a seat on its board of directors on the condition that he limit his purchases to no more than 14.9% of the company’s outstanding shares. But the company said five days later Musk declined.
Ives said Twitter’s poison pill route is a predictable defensive maneuver but could be seen as a “sign of weakness” for the Wall Street firm.
Musk might try to challenge the measure in court, but “no court has struck down a poison pill in the last 30 years,” said John Coffee, a law professor at Columbia University. Rallying shareholders to evict the board might be more feasible, but also presents challenges for Musk, Coffee said.
Musk’s offer was already met with resistance before Twitter launched its backlash on Friday.
A Saudi prince who is a major Twitter shareholder scoffed at Musk’s offer in a tweet on Thursday. Al Waleed bin Talal said he would reject Musk’s overtures because he didn’t think $43 billion “comes close to Twitter’s intrinsic value, given its growth prospects.” The prince punctuated the tweet with another from 2015 revealing that his Kingdom Company had increased its stake in Twitter to 5.2%, about half of what Musk currently owns.
While Musk’s $54.20 per share offer is nearly 40% higher than Twitter’s stock price before he disclosed his huge investment, it remains well below the maximum closing price of $77.63 reached less than 14 months ago. At that time, Twitter was valued at around $62 billion.
Musk responded to the prince with a tweet asking how many Twitter shares he owns, then made what might have been a veiled reference to the 2018 murder of journalist Jamal Khashoggi who was linked to Saudi Crown Prince Mohammed bin Salman. “What is the Kingdom’s view on freedom of expression for journalists?” Musk asked in a tweet on Thursday.
In a sign that investors are skeptical of Musk’s offer, Twitter’s stock fell on the first day of trading after the takeover bid was announced on Thursday – the exact opposite of what a reaction looks like market approval. Stock markets were closed on Friday for the Good Friday holiday. Twitter said it plans to disclose more details about its stock ownership plan in an upcoming regulatory filing.
Another outspoken billionaire, Dallas Mavericks owner and tech investor Mark Cuban, took to Twitter to share his theory that Musk is making his bid to boost the company’s stock price so he can sell his stake for a profit. Using a layman’s term, Cuban also postulated that Musk was using the offer to harass the United States Securities and Exchange Commission, the stock market regulator that fined Musk $20 million in 2018. after he tweeted about a potential Tesla takeover that never materialized.
During Thursday’s TED event, Musk made it clear he was still furious with the SEC and cursed regulators with profanity.
AP Technology Writer Michael Liedtke in San Ramon, California contributed to this report.