One day after Tesla and SpaceX billionaire Elon Musk
offered to buy Twitter for $43 billion, the social media company announced the
adoption of a limited-duration shareholder rights plan (the “Rights Plan”), otherwise known as a “poison pill.”
Twitter's board of directors –– which Musk
curtly denied his invitation to join after becoming the company's largest
shareholder on April 4 –– voted unanimously to adopt the Rights Plan.
“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 judgements and take
actions that are in the best interests of shareholders,” reads Twitter’s recent statement.
With this new “poison pill” in place, shareholders will be allowed to
purchase additional shares at a discount if any person or group acquires beneficial ownership of at least 15% of Twitter's outstanding common stock without the board's approval (Musk currently owns
over 9% of Twitter’s shares.)
In other words, anyone attempting to acquire Twitter will be forced to negotiate directly with the board.
Musk disagrees with this move. On Thursday
he tweeted: “Taking Twitter private at $54.20 should be up to shareholders, not the board,” with a Yes/No poll. As
of Friday at 1:30 P.M., almost 3 million users have voted.
Now if Musk attempts to continue with his offer, or provide
another, he must persuade Twitter's top investors –– including the Vanguard Group, Morgan Stanley, and BlackRock –– to sell their stocks directly to him.
Twitter’s Rights Plan will be in place until April 14, 2023.