Twitter uses a poison pill to suppress musk takeovers

Twitter unveiled its counterattack against Elon Musk on Friday, using a strategy devised to repel corporate robbers in an attempt to block an offer to take over the world’s richest man.

The strategy, known as the poison pill, would flood the market with new stocks if Mr. Musk, or any other individual or group working together, bought 15 percent or more of Twitter shares. This would immediately reduce the share of Mr. Muska also made it much more difficult to buy the company’s bulky drink. Mr. Musk currently owns more than 9 percent of the company’s stock.

The goal is to get anyone who tries to take over the company to negotiate directly with the board. Investors rarely try to break the threshold of poison pills, securities experts say, warning that Mr. Musk rarely sets a precedent.

Companies are often cautious in using poison pills because they do not want to be seen as hostile to shareholders. However, some critics, such as Institutional Shareholder Services, an influential advisory group, indicated that they were open to tactics in certain circumstances.

Twitter said the mechanism would not stop the company from conducting sales talks with any potential buyers and would give it more time to negotiate a deal that offers a sufficient premium.

The pill “doesn’t mean the company will be independent forever,” said Drew Pascarella, a senior lecturer in finance at Cornell University. “It just means I can defend myself effectively against Elon.”

Mr Musk announced on Thursday his intention to take over the social media service, announcing an unsolicited bid worth more than $ 40 billion. In an interview later that day, he challenged Twitter’s moderation policy, calling Twitter a “de facto city square” and saying “it’s really important that people have a reality and a perception that they can speak freely within the law.”

He also said that he has a plan B if the board rejects his offer, although he did not share it.

Analysts say Mr. Muska – which offers significantly more per share than the current share price, but is well below its peak last year – could have underestimated the company. They also expressed concern about the ability of Mr. Muska to combine funding. If the board were to negotiate an agreement with Mr Musk, it could involve substantial termination fees that could allay concerns about its volatile nature, which conflicts with the possibility of closing the deal, some securities attorneys said.

Twitter has been trying to quarrel with the richest man in the world in recent weeks while buying his shares. Last week, Twitter offered Mr. Musk a seat on the board, but he broke the arrangement when it became clear he would no longer be able to freely criticize the company. He turned down the role on Saturday and informed Twitter on Wednesday night about his plans to buy.

Twitter said in a statement that its poison pill plan, which will remain in effect until April next year, is “similar to other plans adopted by public companies in similar circumstances.”

Other major Twitter shareholders, according to FactSet, include investment giant Vanguard Group, the largest, 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.

Ark Investment Management, led by Cathie Wood, the star of the Reddit investment community that previously bet on Mr. Musk, has a 2.15 percent stake. One of the founders of Twitter, Jack Dorsey, who is friends with Mr. Musk, has a 2.2 percent stake. The Twitter board, which includes Mr. Dorsey, unanimously voted to approve the poison pill.

It seemed that Mr. Musk is preparing for a long battle on Thursday. “Taking Twitter as private for $ 54.20 should be on the shareholders, not the board,” he wrote on Twitter, with a yes / no poll.

Initial offer of Mr. Muska left significant questions open. Mr. Musk hired Morgan Stanley to advise on the offer, although the investment bank is not known for financing large deals on its own. Twitter shareholders also acted cautiously: Twitter shares fell nearly 2 percent on Thursday, closing at $ 45.08 – well below Mr. Musk’s offer. U.S. stock markets closed on Friday due to Good Friday.

Prince Al Waleed bin Talal of Saudi Arabia, who described himself as one of Twitter’s largest and longest-serving shareholders, said on Thursday that Twitter should reject Mr Musk’s offer because it was not high enough to reflect.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 Twitter’s privacy would allow more freedom of speech on the platform. “My strong intuitive feeling is that having a public platform that is trusted and widely involved is extremely important for the future of civilization,” he said in an interview at a TED conference on Thursday.

He also insisted that the algorithm used by Twitter to rank its content, deciding what hundreds of millions of users see on the service each day, should be made public for user review.

Mr.’s concern Muska is shared by many Twitter executives, who have also called for greater transparency of his algorithms. The company announced internal research on bias in its algorithms and funded efforts to create an open, transparent standard for social media services.

But Twitter opposed Mr.’s stubborn tactics. Muska. After a board meeting on Thursday morning, the company began exploring options to block Mr. Muska, including a poison pill and the possibility of courting another customer.

During a joint meeting Thursday, Twitter CEO Parag Agrawal tried to reassure employees of the potential quake. Although he declined to share details about the board’s plans, he encouraged employees to stay focused and not allow Mr. Musk interferes.

This is an evolving story. Check again for updates.

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