After becoming the largest individual shareholder in Twitter, Elon Musk offered to take Twitter (NYSE: TWTR) private for $54.20 a share, which is 20% higher than the last traded price. He stated that the goal of his move is for freedom of speech instead of financial gains.
It is still unclear which side the board is leaning toward, but rumors said that the board may consider a poison pill to prevent the takeover. Not only that but there is another obstacle standing in the way. Bin Talal, a Saudi royalty who reportedly owns 5% of Twitter has publicly rejected Musk’s offer.
Musk said that he has a Plan B if the offer is rejected, but did not disclose what the plan is. Not only that but Musk also threatened to sell his shares (9.2% at the time of writing) if his offer is not accepted.
Knowledge base:
The poison pill, also known as the shareholder rights plan is a defense mechanism used by companies to prevent a hostile takeover by another company. It accomplishes such an objective by triggering an automatic stock dilution by issuing new shares when the potential hostile entity owns too much of the company’s shares and has a larger than comfortable stake in the company.
One such example is in the case of Netflix when Carl Icahn, the investor who is famous for hostile takeovers, acquired 10% of Netflix back in 2012. Netflix’s poison pill plan will allow existing shareholders to purchase two shares for the price of one when there is a new acquisition exceeding 10% of ownership, or when the transfer of assets exceeds 50%.
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