The
move would allow existing Twitter shareholders to buy additional shares at a
discount, thereby diluting Musk’s stake in the company and making it harder for
him to corral a majority of shareholder votes in favor of the acquisition.
Twitter’s
plan would take effect if Musk’s roughly 9% stake grows to 15% or more.
Twitter
said the poison pill would enable its investors to “realize the full value of
their investment” by reducing the likelihood that any one person can gain
control of the company without either paying shareholders a premium or giving
the board more time to evaluate their offer. Such defenses, formally called
shareholder rights plans, are used to prevent the takeover of a corporation by
making any acquisition prohibitively expensive for the bidder.
Even if it discourages his takeover attempt, Musk could
still take over the company by waging a “proxy fight” in which shareholders
vote to retain or dismiss the company’s current directors. Twitter said the
plan doesn’t prevent the board from engaging with parties or accepting an
acquisition proposal if it’s in the company’s best interests.
“They’re gearing up for a battle here with Musk,” said
Daniel Ives, an analyst for Wedbush Securities. “They also have to give
themselves time to try to find another potential buyer.”
Twitter revealed in a securities filing Thursday that Musk
offered to buy the company outright for more than $43 billion, saying the
social media platform “needs to be transformed as a private company” in order
to build trust with its users.
“I believe free speech is a societal imperative for a
functioning democracy,” Musk said in the filing. “I now realize the company
will neither thrive nor serve this societal imperative in its current form.”
Later on Thursday, during an onstage interview at a TED
event, he went even broader: “Having a public platform that is maximally
trusted and broadly inclusive is extremely important to the future of
civilization.”
Musk revealed in regulatory filings over recent weeks that
he’d been buying Twitter shares in almost daily batches starting Jan. 31,
ending up with a stake of about 9%. Only Vanguard Group controls more Twitter
shares. A lawsuit filed Tuesday in New York federal court alleged that Musk
illegally delayed disclosing his stake in the social media company so he could
buy more shares at lower prices.
After Musk announced his stake, Twitter quickly offered him
a seat on its board on the condition that he would limit his purchases to no
more than 14.9% of the company’s outstanding stock. But the company said five
days later that Musk had declined.
Ives said Twitter’s poison pill path is a predictable
defensive maneuver but could be seen as a “sign of weakness” on Wall Street.