Poison pill, a battle deployed over Musk
$Twitter (Delisted)(TWTR.US$ is back to the table with Elon Musk after the company came under increasing pressure from its sharehoders to negotiate.
The social media company expected to shoot down the offer at first place. It had adopted a so-called poison pill to fend off a potential hostile takeover after Musk disclosed the financing details on his $43 billion acquisition offer to buy Twitter for $54.20 a share.
Twitter's poison pill continues the pot joke references by including a provision to allow investors to receive stock at $420 per share.![]()
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What's a "shareholder rights plan" or a poison pill?![]()
Poison pills were developed in the early 1980s as a defense tactic against corporate raiders to effectively wasted their takeover efforts –similar to the suicide pills that spies supposedly swallow if captured.
A company sets up a provision in its governing documents that says that the board of directors can issue a form of preferred stock giving the existing stockholders the right to purchase stock at a discounted price when an acquirer obtains a certain number of shares.
Have poison pills ever failed?
Many well-known companies such as Papa John's, $Netflix(NFLX.US$, Kohl's, and Occidental Petroleum have fended off hostile takeovers with poison pills. Nearly 100 companies adopted poison pills in 2020 due to lowering stock prices caused by the pandemic, which would make them an easy target for hostile takeovers.
Papa John's
Shares of $Papa John's(PZZA.US$ fell 8% after the pizza chain proposed the implementation of poison pills that would act against any move by founder John Schnatter himself to take a bigger stake.
OXY
$Occidental Petroleum(OXY.US$ implemented a poison pill plan to defend against unsolicited takeover approaches as activist investor Carl Icahn escalates his campaign to fire the beleaguered U.S. oil producer's board.
Kohl's
Another famous company that triggered a pill recently might be $Kohl's Corp(KSS.US$. The stock price of Kohl's rose by nearly 2% on implementation, and as of April 18, shares were selling at $60.90, up nearly 23% since the beginning of this year. Rebuffing the first suitor ignited a bidding war, helping to drive up the price.
How might Twitter wind up this time
No one has ever swallowed a poison pill and conducted a takeover at an inflated price, showing the effectiveness as such measures could work in fending off takeover attempts.
Considering the current richest visionary entrepreneur's outsize influence, if there is anyone who dares to swallow one, it might be Musk. However, he might need to sell some of his Tesla shares to fund the aquisition, which would be detrimental to the interest of $Tesla(TSLA.US$shareholders in this circumstance.
A tender offer might go south under the protection of poison pills. Yet it could still put pressure on the company to sell if shareholders show a willingness to sell their shares, which is getting increasingly feasible now– report says many Twitter shareholders reached out to the company after Musk outlined a detailed financing plan for his bid on Thursday and urged it not to let the deal slip away.
On the other hand, Elon Musk could also convince 51% of shareholders to replace Twitter's current board members— and then buy Twitter with the support of new board members, thereby avoiding the pill.
Activating the poison pill would also increase vulnerability to greenmail, where stockholders buy enough shares to threaten a takeover and then leverage that threat. In this scenario, the existence of a triggered poison pill could end up as a bigger liability for acquire.
Source: CNBC, Bloomberg, Reuters.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Celestinel : can we get 950 before open
Revelation 6 : Not only are they willing to fall on a sword themselves, they’re willing to cut the throats of the shareholders too. They don’t have any skin in the game and the only reason they are even listening to the shareholders is because the don’t want to get sued later.
Dons hobby : The board of Twitter has a political Mush Head outlook on Twitter, TWITTER IS A POLITICAL ENTITY always has been. The board is and always has been a joke. I don't care how it's done but something has to be done not just with Twitter but this whole Mush Head ideology that is permeating this country. If this does happen which I think it will so I put every dime I have on moo moo in Twitter
Moomoo News GlobalOP Revelation 6: Musk is right to point out that Twitter spends about $2.9 million in cash and stock awards to board members while these board members "own almost no shares" of the company.
Dons hobby : Very true, not only do they not own any stock to speak of but they truly don't give a dam about the company itself because to them it's a propaganda pusher for them.
Moomoo News GlobalOP Dons hobby: The social media company needs to find its own way out.
Dons hobby : Yes like they have been doing, not
Dons hobby : How could you even post that ! For the life of Twitter it has been a sludge pool of Far left Mush Heads that only care about their rip America apart agenda. And for ANYONE to post drivel that Twitter should dig out themselves has no idea what Twitter is all about. If you don't believe me just look at how the board has always been about making the shareholders money, OH wait no it doesn't. Your post makes me believe that YOU are also of the same.mind set as the Mush Heads that have been doing all they can you destroy this country. and I have to say that makes me have reservations about anything you will ever post again.
Dons hobby : EVER