Twitter announced this Friday measures to resist the hostile takeover bid launched by Elon Musk for 43,000 million dollars, destined to buy the social network to transform it into a platform that guarantees free expression.
Twitter’s stock strategy against the richest man on the planet is known as a “poison pill” in financial jargon.
The maneuver makes it difficult for one shareholder to accumulate too much stake without board approval, by activating an option that allows others investors buy more shares of the company at a discount.
That would greatly increase the price that Musk would have to pay to take full control of the social network.
It will be activated if Musk exceeds 15% of shares in the company without the authorization of the board. The South African tycoon, owner of the electric car company Tesla and the SpaceX aerospacecurrently owns a little over 9% of Twitter’s share capital.
The plan “will reduce the likelihood that any entity, person, or group will obtain the Twitter control through open market accumulation without paying all shareholders an adequate control premium or giving sufficient time to the board of directors to make informed decisions,” the San Francisco-based company said in a statement.
Twitter thus shows that it plans to resist the popular businessman’s proposal to buy the social network and make it a closed capital company.
“It’s a defensive tactic that was predictable,” said Wedbush analyst Dan Ives. But it will not be perceived “in a positive way” by the shareholders, due to the risk of a counterproductive “dilution”.
And the plan will “certainly be fought in court” because the board of directors has an obligation to act in the interest of the company and to increase its value for shareholders.
This Friday, Musk expressed on his platform account “Thank you for the support!” with a survey conducted by “Bitcoin Archive”, titled “Do you want Elon Musk to buy Twitter?”. 73% of the 19,494 voters answered “yes”.
But he also asked his own question: “Should taking Twitter private at $54.20 should be a shareholder issue, not a Board issue?” More than 83% of the 2.9 million votes were in favor of “yes”.
always provocative
Elon Musk rocked the stock and tech world on Wednesday when he announced a proposal to buy Twitter at a price that would take it to $43.4 billion from its current value of $36 billion.
His plan faces questions on several fronts, including possible rejection and the challenge of raising the money offered, but it could have wide-ranging repercussions on the social network if it comes to fruition.
On Thursday he declared that he has “sufficient funds” for the transaction and assured that he had a plan B if the board of Twitter he refused the offer. Also, he stressed that he was not looking to make money from the acquisition, during a live interview at the Ted2022 conference.
He did not elaborate on how he would finance the purchase, but he would likely have to go into debt or divest some of his Tesla or SpaceX shares.
Very active and popular on Twitter, where he has about 82 million followers, but at the same time very critical of the platform’s content moderation policy, he says he wants to make it the platform for “freedom of expression”, with less limits on what users can tweet.
After buying 73.5 million shares of the company’s common stock earlier last week, he was invited to join its board of directors but ultimately turned down the offer after a series of suggestions to modify the platform, such as adding a button to edit tweets or remove advertising, main source of income from Twitter.
Adept at controversy and jokes, he also chained some provocative tweets, wondering if Twitter wasn’t “dying” because some accounts with many followers post little content.
On Thursday, the tycoon acknowledged that he was not “sure of being able to buy” the company and explained that he hoped to gather as many shareholders as possible in his project.
You will no longer be able to count on at least one of them.
Saudi Prince Alwaleed bin Talal also said on Twitter that he was rejecting an offer that was too low, to which Musk responded by ironically about “media freedom of expression” in Saudi Arabia.
But Musk’s influence and pressure left Twitter leaders little choice, analysts at Wedbush Securities said.
For their part, Wedbush analysts said Twitter’s board of directors will have to accept the offer or find another buyer.
“We think that this telenovela will end with the acquisition of Twitter by Mr Musk after this hostile takeover,” they said in a note on Thursday, anticipating a wave of possible questions about financing, regulatory issues and how the billionaire would allocate his time among his various companies.
“The board doesn’t like Musk because they disagree on almost everything and his style is incompatible with their corporate culture,” Dan Ives said in an analysis published Thursday in the Daily Mail.
But the board doesn’t have much choice, he said, because “Musk seems as determined to run Twitter as SpaceX or Tesla.”
