Twitter uses poison pill to defend against Tesla boss buyout > teslamag.de

Tesla boss Elon Musk’s attempt to buy all of Twitter’s shares in order to operate the service as a private company in the future is increasingly taking on the hallmarks of a classic takeover battle. After Musk informed Twitter’s board, which he plans to join after buying the first 9 percent, of his intention to buy the rest, they hired investment bank Goldman Sachs to explore better options. The Tesla boss is taking advice from Morgan Stanley, but the next move was made by Twitter.

Twitter’s poison pill to fend off Musk

A time-limited subscription rights plan had been decided upon, the beleaguered company objectively reported in a press release on Friday. Trading services immediately described this as a “poison pill”, and indeed subscription rights in Twitter’s chosen form are a classic measure to prevent unwanted takeover offers. The drastic expression should not be understood in such a way that a target company poisons itself out of despair, but rather that the buyer should choke on it.

In the case of Twitter, the plan is said to be designed to allow all investors to realize the full value of their investment by reducing the likelihood of any individual or group gaining control of the company through open market purchases. . At the same time, the board must gain time to make important decisions in the interests of investors. And it has unanimously decided that if someone owns 15 percent or more of Twitter stock, all other shareholders will be entitled to buy two additional shares at a discount for each of their existing shares.

So if Tesla boss Musk buys another 6 percent of Twitter on the stock market, the result would be that the number of shares remaining would triple. As a result, the price should drop, but only Musk would not receive any compensation in the form of additional shares, and his overall holding would also decrease accordingly. That sounds unfair, but according to Investopedia, this and other forms of poison pill practice have been common since the 1980s and have withstood lawsuits against them.

Tesla boss still has a plan B

This won’t preclude a takeover of Twitter by the Tesla boss, but it will likely be more expensive and difficult. The activation of the rights is subject to the proviso that the excess of 15 percent is not endorsed by the Board of Directors. Then Musk could strike a deal with him, or a “white knight” could come in with a management-backed takeover offer and save Twitter from him.

In the board briefing, he ruled out the possibility of the Tesla boss outperforming his own offer of $54.20 a share and also expressed a lack of confidence in him. Musk said in an interview Thursday that he wasn’t sure if the Twitter purchase would succeed, even if he certainly didn’t lack the necessary financial means. But he also has a plan B. Musk would not say what it is, but he had previously considered founding his own news platform. If that happens, it could become clear whether the Tesla boss and his company need the much criticized and used service more urgently than they do, or vice versa.

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