The drama of billionaire Elon Musk's planned acquisition of Twitter by billionaire Elon Musk continues. Twitter's board of directors also created a shareholder rights plan with the aim of thwarting Musk's bid to make Twitter a private company and seek to make it a bulwark of free speech.
"The plan seeks to ensure that whoever controls social media companies through open market accumulation pays all shareholders the appropriate control premium," Twitter said in a statement.
Twitter implemented the plan as well to buy time. The reason being, the Board of Directors wants to be able to analyze and negotiate any deal, and possibly still accept it.
This so-called poison pill strategy allows existing shareholders the right to purchase additional shares at a discount, effectively undermining the adversarial party's ownership interests. Toxic pills are common among companies that have come under fire from activist investors or in hostile takeover situations.
Previously, the CEO of Tesla Inc. Elon Musk offered an acquisition price of $54.20 per share in cash for Twitter, for a company value of $43 billion. Musk said the bid price was the best and last one as he has acquired more than 9% of Twitter since the start of this year.
In addition to Musk's bid, Twitter has attracted takeover interest from other parties, including tech-focused private equity firm Thoma Bravo.
Musk called the offer a high price and Twitter shareholders would love it.
However, at least one prominent investor said the bid was too low and the market reaction seemed to agree. Saudi Arabia's Prince Alwaleed bin Talal said the deal did not come close to the intrinsic value of the popular social media platform.
Musk said he wasn't sure he would actually be able to get his hands on Twitter. He added that the goal is to also retain as many shareholders as the law allows, rather than retaining sole ownership of the company itself.
Musk also said he had a plan B if the Twitter board turned down his offer. Musk will rethink his investment in Twitter if his acquisition caps fail.
"If the deal doesn't work, given that I don't have any confidence in management and I also don't believe I can drive the necessary changes in public markets, I need to reconsider my position as a shareholder," Musk said.
Twitter, unlike Meta Platforms Inc., Snap Inc., and other tech giants, does not have a shareholder with majority voting control. That makes the company particularly vulnerable to activist investors and takeover interest.
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