Twitter protects itself against Elon Musk’s hostile takeover by activating a financial mechanism known as ‘the poison pill’


Earlier this month, Elon Musk became (or, rather, revealed that he had become) in the largest shareholder of Twitter. A week and a half later, just two days ago, came the second part of the South African tycoon’s play: a hostile takeover bid to buy 100% of the microblogging network for 43,000 million dollars.

well, yesterday the current Twitter board made a move following its “unsolicited and non-binding proposal” for the acquisition and announced in a statement that it has a plan to prevent (or, at the very least, delay and make more expensive) Musk’s takeover of Twitter: activate a mechanism called ‘poison pill’.

But, what does this mechanism with such a curious name consist of? Essentially, what it does is block hostile takeovers for a year. give certain shareholders the right to buy more shares if someone tries to take control of the companyalthough it would not enter into force until the interested party does not acquire at least 15% of the shares.

“[Este mecanismo] reduces the likelihood that any entity, person or group will gain control of Twitter through open market accumulation without paying all shareholders the appropriate premium for control, or without giving the board sufficient time to make decisions informed and carry out actions that defend the interests of the shareholders”.

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According to statements made to the AP by analyst Paul Harloff, This movement does not prevent Twitter from negotiating the acquisition, nor does Elon Musk end up taking the company by storm.only “makes it much more expensive for him to buy” and gives the current board “more influence”.

“They can force you to increase your offer, even though you said $54.20 a share is your final offer,” Harloff continues, “he’s a person who’s been known to change his mind.” That $54.20 is already a 54% premium on the price closing date on January 28, the day before Musk started buying Twitter shares.

Before knowing that the Twitter board would approve this measure, Musk criticized the possibility of doing something like that, alleging that “It would be completely indefensible not to put this offer to a shareholder vote”.

Shortly before, during the public presentation of his takeover bid, Musk stated that a rejection of it would force him to reconsider your position as a shareholdera move that could lower its share price.

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A confrontation that goes beyond the merely financial

We already explained a few days ago that one of the causes of both Musk’s interest in Twitter and the confrontation between him and Parag Agrawal, the current CEO of the company, revolves around the moderation policies supported by the latter (although mostly inherited from the previous stage).

Agrawal had already shown himself, even before occupying his current chair, in favor of Twitter “focusing less on thinking about freedom of expression”and more on “thinking about how times have changed,” a stance that Musk has been widely and publicly criticizing since long before he submitted his hostile takeover bid.

One of Agrawal’s biggest supporters in his efforts to rein in Musk has turned out to be Saudi Prince Al Waleed bin Talal, also one of Twitter’s largest shareholders through his company Kingdom Holding Company (KHC), which has already been against Musk’s offer of $54.20 per share for not approaching “the intrinsic value of Twitter given its growth prospects.”

Image | Based on a still from “Fastic Four” (2005)


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