Twitter Adopts ‘Poison Pill’ To Counter Elon Musk’s Takeover Bid

Synopsis: Twitter in a press release has said that the board of directors of the company has unanimously agreed upon the adoption of a ‘limited duration shareholder rights plan (Rights Plan also known as Poison Pill Strategy).

Days after buying shares and becoming the majority shareholder in the microblogging platform Twitter, Tesla, and SpaceX CEO Elon Musk firstly rejected to be on the company’s board then offered to acquire Twitter entirely with the value of $54.20 per share with the company valuation at $43 billion. In a bid to avoid the acquisition by Tesla CEO, Twitter has used the ‘Poison Pill Strategy’.

Twitter in a press release has said that the board of directors of the company has unanimously agreed upon the adoption of a ‘limited duration shareholder rights plan (Rights Plan also known as Poison Pill Strategy). It further stated that the board adopted the plan following, an “unsolicited, non-binding proposal to acquire Twitter.”

What is Poison Pill Strategy?

'Poison Pill Strategy' is also known as the 'Shareholder Rights Plan'. This is a defensive tactic employed by a company's board of directors in a bid to avoid an acquisition or a takeover. Under this tactic, the company lets the existing shareholders buy a fresh set of shares in the company at lower or discounted prices. This process leads to the acquisition becoming way costlier. 

 Twitter said in the statement,

The Rights Plan will reduce the likelihood that any entity, person or group gains control of Twitter through open market accumulation without paying all shareholders an appropriate control premium or without providing the Board sufficient time to make informed judgments and take actions that are in the best interests of shareholders.

Further adding to the statement, the company said, “The Rights Plan does not prevent the Board from engaging with parties or accepting an acquisition proposal if the Board believes that it is in the best interests of Twitter and its shareholders.” According to the announcement by the company, the ‘Rights Plan’ or Poison Pill Strategy’ will expire on April 14, 2023.

Reportedly, Musk had an offer of buying Twitter stating that he would pay $54.20 per share for the company. He had posted a link of his filing with the United States (US) Securities and Exchange Commission, giving it the title “I made an offer”.

The Tesla CEO who had recently acquired around 9 percent shares in Twitter, stating the reason behind his interest in buying the platform said, 

Since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company.

Further adding that his offer is ‘best’ and ‘final’ yet if not accepted he would re-evaluate his position as a shareholder in the company, Musk asserted, “I am offering to buy 100 percent of Twitter for $54.20 per share in cash, a 54% premium over the day before I began investing in Twitter and a 38 percent premium over the day before my investment was publicly announced.”

Musk has been a critic of Twitter alleging the platform of curbing free speech and had offered to launch a new social media platform after conducting a poll on Twitter. Following the poll, he later on bought majority shares in the company and conducted a poll to bring ‘Edit Feature’ on the platform. However, he reportedly declined to join the board of the company and then made the offer to acquire 100 percent shares in the company.