Tuesday, April 19, 2022 / 02:21 PM / by Mobile World / Header Image Credit: Knowledge 

Twitter's board of directors announced a new shareholder rights plan on Friday (15 April) aimed at protecting itself from Elon Musk's audacious $41.4 billion takeover bid. 

The shareholder rights plan is otherwise known as a "poison pill" in the financial world because it's used to thwart hostile takeover attempts. The shareholder rights plan, which will expire in one year, is exercisable if a party acquires 15 per cent of the stock without prior approval. 

The rights plan was designed to ensure that anyone taking control of Twitter through open market accumulation pays all shareholders an appropriate control premium. The rights plan would dilute the shares of a hostile takeover attempt. 

"In the event that the rights become exercisable due to the triggering ownership threshold being crossed, each right will entitle its holder 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," according to Twitter's press release. 

By announcing the shareholder rights plan, Twitter's board is shielding itself from Musk's attempt to take over the social media giant.

Buying time

Citing an unnamed source, Bloomberg reported that Twitter's board also put the plan in play to buy time to consider Musk's offer. 

"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 Twitter's press release. 

On Thursday, news broke that Musk had made an offer of $54.20 per share to take the company private, which was 38 per cent higher than the closing price of Twitter's stock on 1 April. Musk said the bid was his best and final offer. 

A US Securities and Exchange Commission (SEC) filing released 4 April showed Musk had acquired a 9.2 per cent stake in Twitter on 14 March. 

At the time, that made him the largest shareholder in Twitter, but Vanguard Group recently increased its stake in the social media platform to 10.3 per cent, according to The Wall Street Journal. 

Last week Musk was offered a seat as an independent director on Twitter's board, which he turned down prior to announcing his takeover bid. 

During a Thursday interview at the TED conference in Vancouver, Musk said his primary motivation for taking over Twitter was to protect its standing as a free speech platform. He also said he had a "Plan B" if his current takeover attempt failed, but didn't provide any details, according to CNBC. 

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The post; Twitter Counters Elon Musk with Poison Pill Plan first appeared in MobileWorldLive on April 15, 2022