Twitter shares gained on Monday after the social media company launched a so-called poison pill defence to thwart an unsolicited bid by Elon Musk to take the company private at $54.20 (€50.30) a share.
A securities filing on Monday confirmed the defence strategy Twitter outlined last week, which would allow the company to issue new stock that all shareholders except Musk would be able to buy at a discounted price. It imposes a “significant penalty” on any person or entity that would acquire more than 15 per cent of the company without board approval, according to the filing. Musk currently owns just over 9 per cent of Twitter shares.
“The board adopted the rights agreement to protect stockholders from coercive or otherwise unfair takeover tactics,” according to the filing.
Twitter had gained 2.9 per cent to $46.39 by late morning trading in New York.
Twitter is using the poison pill defence in order to buy time to come up with a plan that would be in the best interests of its shareholders, according to a person familiar with its plans. The company has also been fielding takeover interest from other parties, including technology-focused private equity firm Thoma Bravo LLC, according to a person familiar with the matter.
Private equity firm Silver Lake, which already owns a significant stake in Twitter, would also make sense as a partner since it has an existing relationship with Musk as well, but it’s unclear if they’re interested. Meanwhile, Musk may try to partner with Oracle, given that its co-founder Larry Ellison is on Tesla’s board and that Oracle has previously shown interest in taking a stake in TikTok, another popular social media company, according to Bloomberg Intelligence analysts.
Bid rejection
Musk, for his part, has said any rejection of his bid would cause him to re-evalute his stake in Twitter. Over the weekend, Musk tweeted that the economic interests of Twitter’s board were not aligned with shareholders. He was responding to a tweet about board members’ stock holdings, saying that with the departure of Jack Dorsey, the board “collectively owns almost no shares”. In a tweet on Monday, Musk, who is also chief executive officer of Tesla, said if his Twitter bid succeeds, board members would not be given a salary.
Tesla pays its own directors an annual cash retainer of about $20,000 plus certain additional fees, but they also each receive stock option grants every few years – meaning they stand to make tens of millions of dollars or more with Tesla’s stock price gains.
Twitter’s board is “in a tough spot – the validity of Mr Musk’s bid remains uncertain and accepting a bid below the 52-week high of $73 is difficult,” Wells Fargo Securities analyst Brian Fitzgerald wrote in a note to investors.
Since making the offer last week, valuing the company at $43 billion, Musk has been posting on his Twitter account in what appears to be a social media campaign to sway public opinion in favour of his bid.
The billionaire entrepreneur also floated a cryptic tweet with the word “tender”, a likely wink-and-nod reference to a potential tender offer. – Bloomberg
