Twitter Employs Poison Pill to Counter Musk Takeover

Twitter unveiled its counterattack against Elon Musk on Friday, using a strategy devised to repel corporate raiders in an attempt to block takeover bids by the world’s richest man.

The so-called poison pill will flood the market with new stocks if Mr. Musk, or any other individual or group working together, has bought a 15 percent or more stake in Twitter. It will immediately reduce Mr. Buying a stake in Musk and a large portion of the company makes it significantly more difficult. Mr. Musk currently owns more than 9 percent of the company’s stock.

The goal is to force anyone trying to acquire the company to negotiate directly with the board. Investors rarely try to break the poison pill threshold, securities experts say, with the warning that Mr. Musk rarely adheres to the hypothesis.

Companies are often wary of using poison pills because they do not want to be seen as unfriendly to shareholders. However, some critics, such as Institutional Shareholder Services, an influential advisory group, suggest that they are open to trickery in certain circumstances.

Twitter said the mechanism would not prevent the company from negotiating a sale with any potential buyer and would give it more time to negotiate a deal than offering an adequate premium.

Drew Pascarella, a senior lecturer in finance at Cornell University, said the pill did not mean the company would be independent forever. “That means they can effectively stop Elon.”

Mr. Musk on Thursday announced his intention to acquire the social media service, publicly making unsolicited bids worth more than $ 40 billion. In an interview later that day, he raised the issue of Twitter’s moderation policies, calling them “de facto town squares” and saying “it’s really important that people have the reality and the concept that they are able to speak freely. The law.”

He also said he had Plan B if the board rejected his offer, although he did not share it.

Analysts say Mr. Musk’s bid – which offers significantly more per share than the current share price but fell below its peak last year – could underestimate the company. They have also expressed concern about Mr. Ability to cobble together Musk’s credit. If the Board negotiates a deal with Mr. Musk said it could include large breakup fees that could allay concerns about its volatile nature, as opposed to the ability to close a deal, some securities advocates said.

Twitter tried to quarrel with the world’s richest man in recent weeks because he broke his shares. Last week, on Twitter, Mr. Kasturi got a board meeting, but when it became clear that he could no longer criticize the company freely, he was shocked at the arrangement. He declined the role on Saturday and reported his acquisition plans to Twitter on Wednesday evening.

Twitter said in a statement that its Poison Pill Plan, which will be in effect until April next year, is “similar to other schemes adopted by companies held under public circumstances.”

Other top Twitter shareholders, according to Factset, include the largest investor Vanguard Group with a 10.3 percent stake; Morgan Stanley Investment Management, with an 8 percent stake; And BlackRock Fund Advisors, with a 4.6 percent stake.

Arch Investment Management, led by Kathy Wood, is the star of the Reddit investment community who previously staked on Mr. Musk has a 2.15 percent stake. One of the founders of Twitter, Jack Dorsey, who is friendly with Mr. Musk has a 2.2 percent stake. Twitter’s board, which includes Mr. Dorsey voted unanimously to approve the poison pill.

Mr. On Thursday, Kasturi seemed to be gearing up for a long fight. “Taking Twitter privately at $ 54.20 should be based on shareholders, not on the board,” he tweeted with a yes / no vote.

Mr. Musk’s early, open-mindedness raises important questions. Mr. Musk has hired Morgan Stanley to advise on bids, although the investment bank is not known for lending to large-scale deals on its own. And Twitter shareholders looked cautious: Twitter’s stock fell nearly 2 percent to close at $ 45.08 on Thursday – Mr. Musk’s offer. US stock markets were closed on Friday due to the Good Friday holiday.

Prince Al Waleed bin Talal of Saudi Arabia, who described himself as one of Twitter’s biggest and longest-serving shareholders, said on Thursday that Twitter Musk’s offer because the company’s “Intrinsic value, Analysts also suggested that Mr. Musk’s price was too low and did not reflect Twitter’s recent performance.

Mr. Musk argued that taking Twitter private would allow more free speech to flow on the platform. “My strong intuition is that having a public platform that is as credible and comprehensive as possible is extremely important for the future of the culture,” he said in an interview at the TED conference on Thursday.

He also insisted that the algorithm Twitter uses to rank its content, which determines what hundreds of millions of users view on the service every day, should be made public for users to audit.

Mr. Musk’s concerns have been shared on Twitter by many executives, who have also pushed for more transparency about his algorithms. The company has revealed Internal research Its algorithms funded efforts to create an open, transparent standard for bias and for social media services.

But Twitter is tapping on Mr. Musk’s hardball tricks. After Thursday morning’s board meeting, the company began looking for options to block Mr. Including musk, poison pills and the possibility of taking another buyer to court.

During an all-hand meeting on Thursday, Twitter’s chief executive, Parag Agarwal, tried to reassure employees about possible moves. Although he declined to share details about the board’s plans, he encouraged employees to stay focused and not be distracted by Mr. Musk.

This is a developing story. Check back for updates.

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