Elon Musk’s aggressive takeover proposal has been thwarted by Twitter, which has adopted a “limited-duration shareholder rights plan,” sometimes known as a “poison pill,” that would make taking control of the social media network considerably more expensive and difficult for the Tesla CEO. We take a look at what Twitter’s plan is to stop Musk’s takeover and what possibilities are remaining for the Tesla CEO to accomplish his acquisition.
The approach, known in the financial world as a “poison pill,” simply allows existing shareholders to acquire newly issued shares in a firm at a discount to the market price, thereby making any hostile takeover effort exceedingly expensive and impractical.
In this situation, the measure will allow current owners to acquire more shares at a discount, preventing anybody from owning more than a 15% interest in Twitter. Musk’s “unsolicited, non-binding bid to purchase Twitter” prompted the Twitter board to submit a defence strategy to the US Securities and Exchange Commission.
Indeed, Musk, who proposed $43 billion for a 9.2% interest in Twitter in exchange for $54.20 per share in cash, appears to have lost his position as the platform’s top stakeholder. According to the most current publicly accessible filings with the US Securities and Exchange Commission, the US registered investment advisor Vanguard Group now owns 82.4 million shares of Twitter, or 10.3 percent of the firm. The asset management boosted its interest in the firm during the first quarter, according to the filing.
Another high-profile Twitter investor, Al Waleed bin Talal Al Saud – a Saudi prince — has claimed that Elon Musk’s bid to acquire the site is too cheap. Musk’s offer was rejected by Al Saud in a tweet on April 15. “Given Twitter’s development possibilities, I don’t feel Elon Musk’s suggested offer ($54.20) comes close to the real worth of the company,” the Saudi prince tweeted. “As one of Twitter’s largest and longest-serving shareholders, @Kingdom KHC and I reject this offer.”
When a firm seeks to purchase another against the wishes of that unit’s management, it is referred to as a hostile takeover offer. In the case of Twitter, management is represented by the platform’s executive board, which has described Musk’s bid as “aggressive.”
On this, Musk has gone back and forth. His most recent proposal, according to him, is to purchase Twitter fully and then take it private “to restore its commitment” to “free expression.” But his offer, which appeared to be met with a resounding no from the investors, raises a number of issues, including if he’s serious in the first place and whether he has the necessary finances.
Musk’s bid to acquire Twitter is unlikely to create any antitrust concerns because he has no experience in the social media area. However, there are still concerns about how he plans to pay for the $43 billion acquisition. Given that Musk only recently diluted Tesla equities valued roughly $16 billion, Bloomberg columnist Matt Levine stated in an opinion article that paying the 9.2% buy-in would have been significantly easier. However, if he wants to buy the whole of Twitter’s stock, he’ll have to use his remaining $55 billion in Tesla stock.
There’s also the matter of Musk needing to get past the SEC’s red tape — an organisation that has already had run-ins with Musk, with the regulator coming out on top. “I was warned by the banks that if I did not agree to settle with the SEC, they would cease supplying working capital and Tesla would go bankrupt immediately…so it’s like holding a gun to your child’s head,” Musk said at a TED event in Vancouver on Thursday. As a result, I was obliged to make an illegal concession to the SEC.”
The board of Twitter’s plan to prevent Musk from buying the firm out may go either way, according to Levine, because the billionaire might organise a proxy struggle with thousands of retail investors behind him in voting out the present board of directors. Notably, Musk has previously organised a Twitter Poll titled: “Taking Twitter private at $54.20 should be up to shareholders, not the board,” with 83 percent of the 2.9 million participants voting ‘Yes,’ and the remaining 17 percent voting ‘No,’ much as he did before selling his Tesla stocks.
