Twitter’s board is implementing the poison pill corporate strategy to retain financial control over the company and prevent Elon Musk from taking over. In retaliation, Musk may bypass the board entirely to take over the popular microblogging platform.
The board of directors at Twitter is ready to swallow the proverbial ‘poison pill’ (releasing a shareholder rights plan) to keep the world’s richest person at bay following the latter’s offer to buy out the social media company with a current market capOpens a new window of $34.42 billion.
The poison pill strategy is a defensive tactic to retain the financial control of any company. It grants existing shareholders, Twitter’s shareholders in this case, the right to purchase additional shares to prevent hostile takeovers.
It was first put into action in the 1980s by the board of directors of General American Oil to prevent T. Boone Pickens from taking over the company. It involves flooding the market with new shares, thereby diluting the acquirer’s equity and making the acquisition much more expensive to pursue.
A day after the Twitter board unveiled its limited duration shareholder rights planOpens a new window , Musk tweeted “Love Me Tender,†a reference to the 1956 single by Elvis Presley. The cryptic message suggests Musk may bypass Twitter’s board and make his offer directly to the Twitter shareholders.
🎶 Love Me Tender 🎶
— Elon Musk (@elonmusk) April 16, 2022Opens a new window
Having acquired over 9% of the Twitter stock only recently, Musk is already the largest individual Twitter shareholder and the second-largest overall after the Vanguard Group. Musk was offered a seat at the Twitter board, and CEO Parag Agrawal even announced that Musk would become a board member.
However, that would’ve restricted the Tesla and SpaceX CEO’s Twitter ownership to 15%, thus eliminating his chances of owning the company which, he says, has the “potential to be the platform for free speech around the globe.†According to his SEC filing, Musk’s plans are to transform Twitter as a private company.Â
Financially speaking, Twitter has yet to realize its potential and is on its way to doubling its 2020 revenue to $7.5 billion or more by 2023. But with free speech thrown into the discussion, Musk’s plans for Twitter seem to encompass something bigger.
Or it may very well be a $43.4 billion joke. Musk’s offer per Twitter share is $54.20, after all. 420, a reference to marijuana, is a long-standing joke among Musk and his followers.
But in all seriousness, Musk’s intentions for Twitter include feature releases such as introducing an edit button, changing the platform’s criteria for what is considered offensive, open-sourcing the algorithm, and perhaps most importantly, changing the moderation policies. Twitter has been criticized in many circles for overly censoring content.
“It’s important to the function of the United States as a free country and many other countries. Civilizational risk is decreased, the more we can increase the trust of Twitter as a public platform,†Musk said at a TED talkOpens a new window on Thursday.
Twitter has evolved as a platform to facilitate discourse on quite literally any subject and influence and shape viewpoints and policies. So it must remain neutral to everyone. “A good sign as to whether there’s free speech is [that] someone you don’t like is allowed to say something you don’t like and if that is the case, then we have free speech.â€
See More: Elon Musk Makes $43.4B All-Cash Bid to Acquire Twitter
In any case, the board is dead set against Musk taking over. This has led to netizens speculating whether Twitter has any bodies buried within the company. A Twitter user suggested the company’s board has been “mired in plots and coups, and particularly amongst Twitter’s founding members,†to which Twitter founder and former CEO Jack Dorsey replied the following:
it’s consistently been the dysfunction of the company
— jackâš¡ï¸ (@jack) April 17, 2022Opens a new window
Dorsey was fired as the Twitter chief executive in 2008 and was replaced by co-founder Evan Williams. Later, Williams was replaced by COO Dick Costolo before Dorsey was reappointed as CEO in 2015. All these moves are considered boardroom coups.
Dorsey stepped down from the helm in November 2021 and has been supportive of Musk’s appointment to the Twitter board before the latter declined it. The current Block chief executive, who will have a seat on Twitter’s board until next month, tweeted, “I’m really happy Elon is joining the Twitter board! He cares deeply about our world and Twitter’s role in it.â€
Dorsey clarifiedOpens a new window that his departure from Twitter wasn’t because of Musk or that Musk’s investment and later offer to buy out isn’t contingent on him leaving.
After Musk revealed he is bidding for ownership of the entire company, investor Marc Andreesen jokingly tweeted:
Just woke up from afternoon nap. Had terrible dream there was free speech on the Internet.
— Marc Andreessen (@pmarca) April 15, 2022Opens a new window
Agrawal, as expected, is keeping his opinion to himself.
OutKick founder, media personality, and Twitter shareholder Clay Travis believes the rejection of Musk’s offer and the subsequent poison pill strategy violates the board’s fiduciary duties. He saidOpens a new window , “I am a long time @twitter shareholder. Today’s actions by the board violate their fiduciary duty to maximize shareholder returns and if they don’t lead to a sale of the company for over $54.20 will lead to monster lawsuits costing the company billions of dollars.â€
Musk’s offer, after all, is at a handsome 38% premium over Twitter’s closing price on April 1. Musk has said his $54.20 per share offer is his “best and final offer.†But if he chooses to sweeten it further, the pressure would mount on the board to accept.
Conversely, the developments have blown open the conversation on the ability of wealthy tech executives, investors, etc., to influence the global discourse on a platform that, in Musk’s words, is the “de facto town square†internationally. Just a refresher, Twitter famously banned a sitting U.S. president in the aftermath of the Capitol hill riots.
Additionally, Musk himself has been accused of firing Tesla employees over disagreeing with him and posting driverless reviews on YouTube, thus making his case of upholding free speech a bit thinner.
Whatever be the case, the implementation of a drastic corporate strategy by a board, which holds next to zero percent of Twitter’s stock, to resist a billionaire’s advances tells something about the tussle between both. It is a battle of controlling ‘the narrative.’
Will Elon Musk be able to take over Twitter? Let us know on LinkedInOpens a new window , TwitterOpens a new window , or FacebookOpens a new window . We would love to hear from you!