On Friday, Twitter announced it would activate a special corporate defense mechanism called the “poison pill” to thwart tech titan Elon Musk’s hostile takeover attempt of the company.
Through this strategy, the Twitter board of directors could allow existing shareholders other than Musk, who currently holds a 9 percent stake, to purchase additional shares at a discount. The tactic would effectively dilute Musk’s ownership interest and force him to negotiate with the board, thereby disincentivizing him from pursuing the acquisition.
The poison pill goes into effect once any individual or a group of people working together buy 15 percent or more of Twitter’s shares. The social-media platform told the New York Times that it will maintain this plan until April 14 of next year, hoping to buy time to reach an agreement with Musk.
On Thursday, Musk offered to buy the entirety of Twitter at $54.20 a share, valuing the company at roughly $43 billion. The Times confirmed that the board had been weighing whether to reject or accept Musk’s bid or trigger the poison-pill option.
The Tesla CEO warned Thursday that in refusing his offer, which he believed represented a generous overvaluation of the company, Twitter would be neglecting its duty to its shareholders, potentially making it vulnerable to future lawsuits.
“If the current Twitter board takes actions contrary to shareholder interests, they would be breaching their fiduciary duty. The liability they would thereby assume would be titanic in scale,” Musk tweeted.
After first agreeing to assume a seat on the board as the then-largest shareholder last week, Musk backtracked and rejected the board seat on Monday, likely after realizing the constraints on his power to effect major change in the platform’s content-moderation policies. As a member of Twitter’s board, Musk technically would have been barred from buying more than 15 percent of the company.
Musk, who calls himself a free-speech absolutist, has long been concerned about censorship on social-media platforms. He started seriously considering taking matters into his own hands after Twitter locked the account of satire site the Babylon Bee last month for allegedly violating its rule against “hateful” language. The offense that landed the Bee in Twitter jail was a post of a comical headline naming Biden administration official Rachel Levine, who is transgender, its “Man of the Year.”
In a Wednesday letter to Bret Taylor, the chairman of Twitter’s board, Musk wrote: “I invested in Twitter as I believe in its potential to be the platform for free speech around the globe. I believe free speech is a societal imperative for a functioning democracy.”