Presenter: What to do with Twitter’s ‘poison pill’ TOU

Presenter: What to do with Twitter’s ‘poison pill’


Presenter: What to do with Twitter’s ‘poison pill’

The Twitter icon is displayed on a mobile phone in Philadelphia on April 26, 2017. Twitter, in a statement on Friday, April 15, 2022, stated that in response to Tesla CEO Elon Musk, its board of directors had unanimously approved the protection of a “poison pill”. Buy the company and take it private. Credit: AP Photo / Matt Rourke, file

Twitter is trying to thwart billionaire Elon Musk’s acquisition attempt with a “poison pill” – a financial tool that companies have been using against unscrupulous lawyers for decades.

What to do with poison pills?

The ingredients of each poison pill are different, but they are all designed to give corporate boards an option to fill the newly created stock market. This strategy was re-popularized in the 1980s when it was followed by companies run publicly by corporate raiders such as Carl Icon – now often referred to as “operational investors”.

Twitter did not release details of its poison pill on Friday, but said it would provide additional information on an upcoming filing with the Securities and Exchange Commission, which delayed the public markets closing on Friday.

If a shareholder accumulates 15% or more, the San Francisco company plan will be triggered. Known as the CEO of electric car maker Tesla, Musk now owns about 9% of the company.

Can a Poison Pill Be a Negotiation Trick?

While they should help prevent unsolicited acquisitions, poison pills open the door to further negotiations that may force the auctioneer to sweeten the deal. If the high price makes sense for the board, a poison pill can be set aside along with the severity it provokes and clarify the way to end the sale.

True to form, Twitter has opened its door by insisting that its poison pill does not prevent its board from “engaging with parties or accepting a high-priced acquisition plan”.

Accepting a poison pill often results in lawsuits alleging that a corporate board and board of directors are using tactics to retain their work against the best interests of the partners. These complaints are sometimes filed by the shareholders, who consider the offer to be reasonable and want to get the money at that price or through the competing bidder for the purchase.

Presenter: What to do with Twitter's 'poison pill'

Tesla CEO Elon Musk attends the opening ceremony of the Brandenburg Tesla factory in Berlin, Germany on March 22, 2022. Twitter said in a statement on Friday, April 15, 2022, that its board of directors had unanimously approved the “poison pill”. Security in response to a proposal by Tesla CEO Elon Musk to buy the company and take it private. Credit: Patrick Pleul / Pool Photo via AP, File

How did Elon Musk respond to Twitter’s announcement?

Musk, a top tweeter with 82 million followers on Twitter, did not immediately respond to the company’s poison pill. But on Thursday he said he was ready to take legal action.

“If the current Twitter board takes action that goes against the interests of the shareholders, they will be violating their trusted obligation,” Musk said. Has tweeted that. “That way the responsibility they feel will be on the Titanic level.”

Musk has publicly stated that the $ 43 billion auction for Twitter is his best and last offer, but other company leaders have said similar before making the final move. With an asset value of $ 265 billion, Musk seems to have pockets deep enough to elevate his offer, though he is still trying to figure out how to finance the proposed purchase.

How has this defense worked in the past?

Acquisition fights often dissolve into gamesmanship, including poison pills and other maneuvers designed to make purchases more difficult. That’s what happened in one of the biggest and most inspiring takeover dances in Silicon Valley history.

The two companies have been at loggerheads for the next 18 months, after business software maker Oracle offered an unsolicited $ 5.1 billion offer to its small rival Peoplesoft in June 2003.

As part of its protection, Peoplesoft not only adopted a poison pill, but also authorized the board to replenish more shares in the market, creating what became known as the “Customer Guarantee Scheme”. The plan promised to pay customers five times the price of their software licenses if Peoplesoft was sold within the next two years, creating a liability of up to $ 800 million for the purchasing company.

Despite a judge ruling in favor of Oracle, Peoplesoft got another helping hand when the U.S. Department of Justice filed a no-confidence motion to block the acquisition.

Although the company ended its sale to Oracle, Peoplesoft’s security strategy benefited its shareholders. Oracle’s final purchase price is $ 11.1 billion — more than twice its original bid.

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