In an attempt to block the acquisition of the company by Elon Musk, the Twitter (NYSE:TWTR) Board of Directors announced a Poison Pill plan today. The move was predicted following Musk’s announcement he wanted to take the company private at a per-share price of $54.20 or a valuation of $43 billion.
According to a release issued by Twitter:
The Board adopted the Rights Plan following an unsolicited, non-binding proposal to acquire Twitter.
The Rights Plan is intended to enable all shareholders to realize the full value of their investment in Twitter. 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.
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.
The Rights Plan is similar to other plans adopted by publicly held companies in comparable circumstances. Under the Rights Plan, the rights will become exercisable if an entity, person or group acquires beneficial ownership of 15% or more of Twitter’s outstanding common stock in a transaction not approved by the Board. In the event that the rights become exercisable due to the triggering ownership threshold being crossed, each right will entitle its holder (other than the person, entity or group triggering the Rights Plan, whose rights will become void and will not be exercisable) to purchase, at the then-current exercise price, additional shares of common stock having a then-current market value of twice the exercise price of the right.
The plan is set to expire by April 14, 2023.
Musk, a free speech absolutist, believes that democracy is at risk due to the prevarications of Twitter that should be more like a public forum instead of an operation controlled by one side of the political aisle.
Musk tweeted yesterday that he believes the review of the offer should be by shareholders and NOT the board of directors.
Taking Twitter private at $54.20 should be up to shareholders, not the board
— Elon Musk (@elonmusk) April 14, 2022
The serial entrepreneur has also criticized management for failing in creating value for its shareholders. Shares in Twitter closed yesterday at $45.08 – well below the offer but far from its 52 week high of over $73.
Some woke Twitter employees have publicly expressed their concern regarding Twitter’s future if Musk takes over. On the other side, Libertarian-leaning David Sacks, a VC who operates a popular podcast, Tweeted:
“Instead of accepting Elon’s premium to the share price, Twitter’s board is planning to dilute the company by giving insiders a sweetheart deal. This is a blatant violation of fiduciary duty and should be illegal.”
“If the game is fair, Elon will buy Twitter. If the game is rigged, there will be some reason why he won’t be able to. We’re about to find out how deep the corruption goes.”
If the game is fair, Elon will buy Twitter. If the game is rigged, there will be some reason why he won’t be able to. We’re about to find out how deep the corruption goes.
— David Sacks (@DavidSacks) April 14, 2022
Jason Calacanis, another big investor and participant in the same podcast, Tweeted that the Poison Pill could be a disaster for shareholders.
Oh my… so they’re going to potentially dilute the cap table and tank the stock on Monday!!?
Maybe they have another buyer circling at a higher price? If not… my lord this could be disastrous. https://t.co/E0bnuhktiu
— @jason (@Jason) April 15, 2022
Musk has stated this is his best and final offer while alluding to a “Plan B” if the Board does not accept the offer.
While other potential acquirers may be reviewing a move to top Musk’s offer – none have yet disclosed their intent to pursue a better offer for Twitter. If Musk’s bid fails, shares in Twitter may implode. Even worse, Musk may take his musings elsewhere – removing one of Twitters’ most popular figures.