Twitter announced this Friday measures to reject the hostile takeover bid launched by businessman Elon Musk for US$43 billion, intended 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 a shareholder to accumulate too much participation without approval of the board, by activating an option that allows other investors to 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 activate if Musk exceeds 15% of company shares without the authorization of the board of directors. The South African tycoon, owner of the electric car company Tesla and the aerospace company SpaceX, currently owns a little over 9% of Twitter’s share capital.
The plan “will reduce the likelihood of any entity, person or group gaining control of Twitter through open market accumulation without paying all shareholders an adequate control premium or giving the board of directors sufficient time to make decisions.” informed”said a statement from the San Francisco-based company.
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.
Elon Musk rocked the stock and tech world on Wednesday whenannounced a proposal to buy Twitter at a price that would raise it to $43.4 billioncompared to 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 said he had a plan B if Twitter’s board rejected 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 give details on how he would finance the purchase but you should surely go into debt or get rid of a portion of your Tesla or SpaceX stock.
Very active and popular on Twitter, where he has close to 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 “free speech” platform, with fewer limits on what users can tweet.
Having bought 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, following a series of suggestions to modify the platform, including adding of a button to edit tweets or the removal of advertising, Twitter’s main source of income.
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 rHe acknowledged not “being 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 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 this soap opera 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 stressed 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.”