Twitter signals intent to "poison" stock should Elon Musk acquire a 15% stake

Cal Jeffrey

Posts: 3,455   +1,033
Staff member
Why it matters: The drama continues as Twitter scrambles to avoid a hostile takeover initiated by Elon Musk. The company has been in fear of the billionaire taking control and implementing his plans, which he revealed earlier this morning. Among the changes, Musk would like to open-source Twitter's algorithms for greater transparency, address spam, and eliminate censorship on the platform.

On Friday, Twitter initiated a shareholder rights plan (also called a poison pill strategy) to thwart Elon Musk from gaining control. A poison pill strategy is when the target company allows existing shareholders (except for the acquirer) to buy more stock in the firm at a discount. This tactic dilutes the company's stock and devalues the acquirer's shares, making the buyout more expensive and less attractive. The poison pill strategy causes the stock to plummet (hence the name) but is considered a reasonably effective defense against a hostile takeover.

The strategy will only come into play if Musk were to acquire 15% of outstanding common shares, but the Twitter board of directors approved the shareholder rights plan today. It will be in effect for one year. So if at any time in the next year Musk acquires 15 percent (he needs 5.8 percent more), Twitter can take the poison pill.

What's interesting about this whole soap opera is that it could be nothing more than Musk trolling Twitter. He filed his initial $2.89 billion purchase for a 9.2-percent stake late with the Securities and Exchange Commission (SEC) as a passive buy, meaning he had no desire to influence company decisions.

However, Twitter immediately went on the defensive, offering him a seat on the board as long as he didn't attempt to buy more than 14.9 percent of the stock. He initially agreed but then changed his mind and amended his purchase to be active, signaling interest in taking control.

Between all the flip-flopping, posturing, and pokes posted by Musk on Twitter, it sounds like he enjoys yanking the board's chain. It's surely not over, but it will be interesting to see how far Musk takes it. He is obviously the one pulling the strings.

Image credit: Daniel Oberhaus

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tellmewhy

Posts: 180   +86
I suspect that “pill tactic” is illegal (even if it’s in the constitution level).

If you are not a private company you don’t have the right to change the price because you don’t like the potential buyer for what ever reason. It’s about equality and about the right of the people to freely participate in the economic activity.

Elon is de facto an engineer. He likes to invent new things (but I don’t think the name of his child was the best place for inventions) and improve already existing things, that’s what an engineer do. Maybe he thinks that the Twitter is a passive infostructure with low r&d and it will operate better as private company without the need the risk to be spread all around with shareholders everywhere. Maybe he’s right and that state will be proven more efficient and more stable. But every private company requires a lot of time from the owner, there is a limit of how many private companies a person can handle because he can’t be everywhere, he can’t handle infinite information and even if he don’t want to sleep he has at max only 24h per day.

There is a difference between an easy to manage company and a company on autopilot. I am sure Elon has the capabilities to manage the Twitter, I am sure Twitter as a company is a good match for him but I am not sure if he has the free time.
 
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Michael7

Posts: 93   +91
Twitter's stock was tanking before Elon made his move. The shareholders are being screwed by Twitter's board of directors which will result in a lawsuit as it should.
Totally agree. This is not a hostile takeover. Shareholders would be well compensated. They went for this tactic because they know Elon would fire them. This definitely calls for a lawsuit against board of directors.
 

julesigles

Posts: 21   +26
Show me someone afraid of the principles of free speech and I'll show you a wanna' be fascist. Some want this move by Elon, others clamor against it. It's good to know where people stand on issues just like it's good to know if there's a jackal sharing the room with you.
 

umbala

Posts: 603   +1,007
I suspect that “pill tactic” is illegal (even if it’s in the constitution level).

If you are not a private company you don’t have the right to change the price because you don’t like the potential buyer for what ever reason. It’s about equality and about the right of the people to freely participate in the economic activity.

Elon is de facto an engineer. He likes to invent new things (but I don’t think the name of his child was the best place for inventions) and improve already existing things, that’s what an engineer do. Maybe he thinks that the Twitter is a passive infostructure with low r&d and it will operate better as private company without the need the risk to be spread all around with shareholders everywhere. Maybe he’s right and that state will be proven more efficient and more stable. But every private company requires a lot of time from the owner, there is a limit of how many private companies a person can handle because he can’t be everywhere, he can’t handle infinite information and even if he don’t want to sleep he has at max only 24h per day.

There is a difference between an easy to manage company and a company on autopilot. I am sure Elon has the capabilities to manage the Twitter, I am sure Twitter as a company is a good match for him but I am not sure if he has the free time.
This is all complete nonsense. It has nothing to do with the constitution. The "poison pill" is about as illegal as a "hostile takeover" that Musk might be planning. This poison pill tactic has been employed many times before, so if it was illegal then it would have been settled in court long ago.
 

umbala

Posts: 603   +1,007
Hopefully we can get our freedom of speech back once twitter becomes private
People like you give me a headache. You have absolutely no idea what freedom of speech actually means. So now you don't have freedom of speech because Twitter isn't controlled by some unstable ******* who fell *** backwards into a lot of money? Please. I suggest you Google what freedom of speech actually means and what it covers.
 

umbala

Posts: 603   +1,007
Totally agree. This is not a hostile takeover. Shareholders would be well compensated. They went for this tactic because they know Elon would fire them. This definitely calls for a lawsuit against board of directors.
Umm, how is this NOT a hostile takeover? The board of directors voted they don't want to sell to Musk and if he tries to buy them out anyway that is by definition a hostile takeover.
 

kapital98

Posts: 396   +356
This is all complete nonsense. It has nothing to do with the constitution. The "poison pill" is about as illegal as a "hostile takeover" that Musk might be planning. This poison pill tactic has been employed many times before, so if it was illegal then it would have been settled in court long ago.

That first sentence was an immediate red-flag. "Poison pill" is the non-legal name but it's something that has been used for decades. It has been litigated (decades ago).

There is absolutely nothing unusual about this tactic. It's why corporate takeovers (think "Bain Capital") are vastly more coherent in their approach. A corporate takeover is supposed to happen fast and without much of a fight. Even if a poison pill is enacted, the corporate takeover already is able to act without it being an issue.

Musk doesn't seem to have done any of the ground work for this. Even though he must have suspected they would do this. Once again, any financial advisor or attorney would have told Musk about this possibility before he went forward (because it is perfectly legal).
 

Michael7

Posts: 93   +91
Umm, how is this NOT a hostile takeover? The board of directors voted they don't want to sell to Musk and if he tries to buy them out anyway that is by definition a hostile takeover.
It technically is but what is important here is that the directors frame it as such because they know they would be fired. It is not to the detriment of the company and the shareholders. So what would you call more hostile (in relation to the current shareholders) : being well compensated for selling or having your stake and the share price slashed?
 

julesigles

Posts: 21   +26
People absolutely love messiahs, who will solve all world's problems. Tip: you have the power yourselves. If you don't like Twitter policies, don't use it.
People absolutely love big government, who will solve all the world's problems. Tip: you have the power yourselves. If you don't like guns, don't use them. If you don't like being poor, get a job. If you don't like racism, stop being racist.

Agreed.
 

Darth Shiv

Posts: 2,271   +827
The Twitter ****-roaches are scrambling to keep Elon from turning on the lights. Oh the horror of the communists losing their privilege to censor conservatives(Americans). Lol, I hope he buys the whole platform
What garbage. There are consequences to "free speech". You can't advocate for genocide and not expect consequences. You can't lie and not be held to account - defamation - in normal society. You cannot faciliate criminal action like insurrection and not expect accountability. Grow up.
 

Darth Shiv

Posts: 2,271   +827
People absolutely love big government, who will solve all the world's problems. Tip: you have the power yourselves. If you don't like guns, don't use them. If you don't like being poor, get a job. If you don't like racism, stop being racist.

Agreed.
First of all, guns access is a societal quality issue. Most of the western world has worked out allowing the average citizen gun rights is detrimental to society. The US proves this time and time again. A failure of 1st world society is one where 6 year olds are taught active shooter drills. Sorry but that is abysmal. Gun massacres constantly... gun rights has been tried. It has UTTERLY failed.

The US problem is the massive racism and lack of police trust and accountability means the PROPER way for a 1st world country to trust their law enforcement is also heavily fractured.

Australia and New Zealand have proven gun massacres can be tackled successfully by removing most guns particularly high calibre from society. We simply don't have social utility having so much.

As for the don't be poor argument, the US society, via capitalism, has ENTRENCHED a poor class. Statistically most of these will not escape poverty wages. This is by design. You offering "get a better job" is a fundamental lack of understanding of how these people are caught where they are and who put them there.

Finally yes the racism and PC thing is all about evolution of empathy and decency in society. People are being called on being pricks to the vulnerable. Just because people are used to not being called on it, they are offended like PC is some bad thing. Sometimes a radical minority calls for action on something stupidly over the top. That is NOT what PC is about. There are always fringe minorities that do NOT represent the core values of the movement.
 

AlaskaGuy

Posts: 254   +180
What garbage. There are consequences to "free speech". You can't advocate for genocide and not expect consequences. You can't lie and not be held to account - defamation - in normal society. You cannot faciliate criminal action like insurrection and not expect accountability. Grow up.
Then maybe you can explain why the official twitter account of Iran's govt.was allowed to call for the nuclear annihilation of Israel with no consequences.
 

AlaskaGuy

Posts: 254   +180
First of all, guns access is a societal quality issue. Most of the western world has worked out allowing the average citizen gun rights is detrimental to society. The US proves this time and time again. A failure of 1st world society is one where 6 year olds are taught active shooter drills. Sorry but that is abysmal. Gun massacres constantly... gun rights has been tried. It has UTTERLY failed.

The US problem is the massive racism and lack of police trust and accountability means the PROPER way for a 1st world country to trust their law enforcement is also heavily fractured.

Australia and New Zealand have proven gun massacres can be tackled successfully by removing most guns particularly high calibre from society. We simply don't have social utility having so much.

As for the don't be poor argument, the US society, via capitalism, has ENTRENCHED a poor class. Statistically most of these will not escape poverty wages. This is by design. You offering "get a better job" is a fundamental lack of understanding of how these people are caught where they are and who put them there.

Finally yes the racism and PC thing is all about evolution of empathy and decency in society. People are being called on being pricks to the vulnerable. Just because people are used to not being called on it, they are offended like PC is some bad thing. Sometimes a radical minority calls for action on something stupidly over the top. That is NOT what PC is about. There are always fringe minorities that do NOT represent the core values of the movement.
Australians and Kiwis voted to give up their guns and that's their prerogative but in the US we have what's called the US Constitution and it includes something called the 2nd Amendment. We aren't giving up our gun rights anytime soon. :)
 

julesigles

Posts: 21   +26
First of all, guns access is a societal quality issue. Most of the western world has worked out allowing the average citizen gun rights is detrimental to society. The US proves this time and time again. A failure of 1st world society is one where 6 year olds are taught active shooter drills. Sorry but that is abysmal. Gun massacres constantly... gun rights has been tried. It has UTTERLY failed.

The US problem is the massive racism and lack of police trust and accountability means the PROPER way for a 1st world country to trust their law enforcement is also heavily fractured.

Australia and New Zealand have proven gun massacres can be tackled successfully by removing most guns particularly high calibre from society. We simply don't have social utility having so much.

As for the don't be poor argument, the US society, via capitalism, has ENTRENCHED a poor class. Statistically most of these will not escape poverty wages. This is by design. You offering "get a better job" is a fundamental lack of understanding of how these people are caught where they are and who put them there.

Finally yes the racism and PC thing is all about evolution of empathy and decency in society. People are being called on being pricks to the vulnerable. Just because people are used to not being called on it, they are offended like PC is some bad thing. Sometimes a radical minority calls for action on something stupidly over the top. That is NOT what PC is about. There are always fringe minorities that do NOT represent the core values of the movement.
So you're anti-gun, anti-capitalist, believe the media when it comes to racism in America, and want a living wage so you can sit home and game and get high all day while spending other people's money. M'kay. On the topic of free speech I'll guess you're against that too. Good luck in the next elections.
 

Darth Shiv

Posts: 2,271   +827
Australians and Kiwis voted to give up their guns and that's their prerogative but in the US we have what's called the US Constitution and it includes something called the 2nd Amendment. We aren't giving up our gun rights anytime soon. :)
Yes and it is literally called an amendment because it was a change that happened to the constitution.
And if you're proud of your society as it stands, tell that to the families of the kids and family and friends of the massacred. Your society is a shitshow by global standards. Gun deaths comparable to 3rd world war zones. Congratulations.