Twitter mounts 'poison pill' defense to resist Musk's takeover attempt
What's the story
The ongoing Twitter-Elon Musk saga seems unlikely to end anytime soon. The tech firm's board of directors has now adopted a "poison pill" defense to thwart Musk's $43 billion hostile takeover bid. This allows Twitter's existing shareholders—barring Musk—to purchase extra shares at a discount, effectively diluting his stake. The plan will come into effect if Musk's 9.2% passive stake jumps to 15% or more.
Context
Why does this story matter?
As of now, it is unclear whether Musk's decision to buy Twitter is guided by monetary or idealistic plans. Nonetheless, Musk is a vocal critic of the tech firm's practices toward safeguarding free speech and stands to gain a lot if the buyout is successful. Meanwhile, analysts say Twitter execs are also likely readying themselves for a legal battle that could get quite ugly.
Details
How does the policy work and what are the pitfalls?
As per Twitter, its new policy should reduce the possibility of a single person getting hold of the company without paying shareholders a hefty premium—making acquisition very expensive for the bidder. However, Musk might still be successful in buying Twitter by waging a "proxy fight," in which the shareholders may be forced to vote on whether the current directors should be retained or dismissed.
Reason?
Why does Musk want to buy Twitter?
Earlier this month, Musk wrote a letter to Twitter Chairman Bret Taylor, stating he invested in Twitter because he believed "in its potential to be the platform for free speech." "However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form." So, he now wants to buy Twitter and unlock its "extraordinary potential."
Timeline
Vanguard Group becomes Twitter's biggest shareholder
Musk earlier said that he wants to buy Twitter in cash for $54.20/share and his offer values the company at approximately $43 billion. The market was initially jubilant with the firm's stocks going up by 13%. However, once the takeover bid was announced they went down by nearly 2%. Meanwhile, Vanguard Group recently became Twitter's largest shareholder with a 10.3% stake, leaving Musk behind.