Twitter to adopt ‘poison pill’ strategy to fend off Musk’s $43B bid for platform

(Credit: Ryan Lash/TED)

Twitter’s Board will adopt the “poison pill” strategy to fend off Tesla CEO Elon Musk’s $43 billion bid to buy the social media platform.

A new statement from Twitter released just after noon on Friday in New York said the company plans to adopt “limited duration shareholder rights plan, enabling all shareholders realize full value of company.”

“Twitter, Inc. (NYSE: TWTR) today announced that its Board of Directors has unanimously adopted a limited duration shareholder rights plan (the “Rights Plan”). The Board adopted the Rights Plan following an unsolicited, non-binding proposal to acquire Twitter,” the company said in a statement. “The Rights Plan does not prevent the Board from engaging with parties or accepting an acquisition proposal if the Board believes that it is in the best interests of Twitter and its shareholders.”

A “poison pill” method allows shareholders to purchase more shares at a steep discount, making the likelihood of a hostile takeover decrease. Pizza chain Papa John’s used the strategy in June 2018 to prevent ousted founder John Schnatter from gaining control of the company. Netflix also used the “poison pill” strategy in 2012.

“The Rights Plan is intended to enable all shareholders to realize the full value of their investment in Twitter,” the platform said. “The Rights Plan will reduce the likelihood that any entity, person or group gains control of Twitter through open market accumulation without paying all shareholders an appropriate control premium or without providing the Board sufficient time to make informed judgments and take actions that are in the best interests of shareholders.”

Musk, who offered to buy Twitter for $54.20 per share yesterday, has stood by the fact that he is not sure whether he will be able to buy the company because of the board, but that he is financially able. However, he has spoken out that, if the Board’s decision is to not allow the buyout, Twitter would be not obliging by the “fiduciary duty” it owes its shareholders. “If the current Twitter board takes actions contrary to shareholder interests, they would be breaching their fiduciary duty,” Musk said on Thursday. “The liability they would thereby assume would be titanic in scale.”

Wedbush’s Dan Ives believes Twitter’s course of action could be challenged legally. “Twitter going down the poison pill path is a predictable defensive measure for the Board to go down that will not be viewed positively by shareholders given the potential dilution and acquisition unfriendly move,” Ives said regarding the platform’s statement. “Likely challenged in Courts,” he added.

Musk said there is a “Plan B” if Twitter does not agree to the sale.

Disclosure: Joey Klender is a TSLA shareholder but is not a TWTR shareholder.

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Joey Klender: Joey has been a journalist covering electric mobility at TESLARATI since August 2019. In his time at TESLARATI, Joey has broken several big stories, including the first images of the Tesla Model S Plaid, the imminent release of the 4680 Model Y through EPA certification, and several expansions to the Lucid AMP-1 factory in Arizona, to name a few. His stories have been featured in several publications, including Yahoo! Finance, Fox News, CNET, and Seeking Alpha. In his spare time, Joey is playing golf, watching MMA, or cheering on any of his favorite sports teams, including the Baltimore Ravens and Orioles, Miami Heat, Washington Capitals, and Penn State Nittany Lions. You can get in touch with joey at He is also on Twitter @KlenderJoey.
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