A day after billionaire Elon Musk launched a $43 billion (£33 billion) offer to purchase Twitter, the company’s board has prepared for a hostile takeover.
A “limited-duration shareholder rights plan,” sometimes known as a “poison pill,” has been implemented.
Anyone with more than a 15% ownership in the firm will be barred from doing so.
It accomplishes this by allowing others to purchase additional shares at a reduced price.
The Twitter board of directors presented their defense strategy to the US Securities and Exchange Commission, claiming that it was necessary in light of Mr Musk’s “unsolicited, non-binding proposition to purchase Twitter.”
When one firm seeks to buy another against the intentions of that company’s management – in Twitter’s instance, the executive board – a hostile takeover bid is made.
A poison pill, according to Josh White, a former financial economist for the Securities and Exchange Commission, is “one of those final lines of defense against a hostile bid acquisition.”
He referred to it as the “nuclear option.”
According to Mr. White, the board has stated “that they do not believe it is a high enough value for the firm.”
The Twitter board decided to go forward with the poison pill since Mr Musk had indicated that he was unwilling to negotiate a higher price.
Mr White says he was shocked by Mr Musk’s negotiating strategy since it could not be the “correct technique” if the eventual goal is to buy the firm.
“If he was genuinely serious about the takeover effort, I believe he would have begun at a price and left the door open for discussion,” he added.
The plan will terminate on April 14th of the next year.
The firm is not being “kept hostage” by the offer, according to Chief Executive Parag Agrawal.
Meanwhile, at the TED2022 conference in Vancouver, Mr Musk remarked, “I’m not sure I’ll be able to buy it.” He also stated that he had a “plan B,” however he did not elaborate.
Mr Musk said earlier this month that he has a 9.2 percent interest in the firm, although he is no longer the largest stakeholder. Vanguard Group, an asset management business, said that its funds now possess a 10.3 percent investment in the company.
Mr Musk has already said that he feels Twitter restricts freedom of expression, and he restated this position at the Vancouver event. He has stated that his major objective is to extend free expression on Twitter, which is a constitutional right in the United States.
Morgan Stanley, a US investment firm, is advising Mr Musk. According to Bloomberg, two banks, Goldman Sachs and JP Morgan, are assisting Twitter.