TWITTER IMPLEMENTS 'POISON PILL' SHAREHOLDER PLAN TO STOP ELON MUSK. HERE'S HOW IT...
0Twitter implements 'poison pill' shareholder plan to stop Elon Musk. Here's how it works
The social network's board made a defensive manoeuvre that could thwart Elon Musk's takeover bid. but he still has a range of options that suggest this Silicon Valley showdown is likely far from over. Twitter's board said on Friday it was implementing a shareholder rights plan. known as a 'poison pill.' that would make it harder and more expensive for Musk (or any other would be buyer) to acquire the company without the board's approval. The plan came a day after Musk made an offer to acquire all the shares in Twitter he does not own for $US54.20 a piece. valuing the company at around $US41 billion ($55.7 billion). That represents a 38 per cent premium over Twitter's closing share price the day before Musk's large ownership stake was revealed. The poison pill plan. detailed in a filing with the Securities and Exchange Commission on Monday. will remain in place for nearly a year and will be triggered if Musk (or any other investor) expands his stake in the company to 15 per cent; he currently owns around 9 per cent of shares. It would give all other shareholders the right to buy one additional share for each share they own at a discount. While other shareholders executing their rights to buy new stock under the plan would have to pay $US210 for each new share they purchased. Musk (or another hostile investor) would have to pay $US420. (Twitter's team proved Musk isn't the only one capable of spicing up a serious corporate standoff with marijuana references.) Now. eyes are back on Musk to see how he might respond to the board's defensive measure. 'This all now becomes 'a game of high stakes poker' between Musk and Twitter's Board with this upcoming week likely an eventful one as we expect to formally hear from both parties on their next move in this MMA battle for Twitter.' Wedbush analyst Dan Ives said in an investor note Sunday. With the poison pill making the prospect of a Twitter takeover more challenging for Musk. he could decide to withdraw his bid. sit tight and exercise the still significant influence he'd have at the company as one of its largest shareholders. But for Musk — who said just last week that he doesn't like to lose — that may be an unlikely course of action. Musk said in his acquisition offer letter: 'I don't have confidence in management nor do I believe I can drive the necessary change [at Twitter] in the public market.' and added that he might reconsider his position as a shareholder if the board rejects his offer. Musk said in an interview at the TED conference last week that he has a 'Plan B' if his bid falls through. although he declined to elaborate on what it is. The media and industry experts have been breathlessly following Musk's Twitter feed for possible clues about his next moves. a testament to the unusual nature of the situation. Some wondered whether his tweet on Saturday with the phrase 'love me tender' was a hint that he's considering circumventing Twitter's board by offering to buy up shares en masse directly from other shareholders through a tender offer. (Alternatively. he might have just been on an Elvis kick this weekend.) A tender offer could potentially be another trigger for the poison pill. However. Musk could launch a conditional tender offer. making the sale of the shares contingent on the Twitter board withdrawing the pill. said Ele Klein. partner and head of the M&A and Securities Group at law firm Schulte. Roth & Zabel. 'The theory of that is that if shareholders tender to that condition. he hasn't violated the poison pill because he's not closing it ... and if enough people tender he can say to the company. 'Look. I have the shares ready to be given to me. the only reason they can't is because you. the board. is blocking the will of the shareholders.' Klein said. Musk could also respond to the poison pill by laying out his financing for the deal and future plans for the company. in an effort to gain support from Twitter's board for his...
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