Twitter adopts poison pill plan to stop Elon Musk from increasing his stake

The company adopted a so-called poison pill on Friday that makes it difficult for Mr. Musk to increase his stake beyond 15%. The billionaire founder of Tesla Inc. already has a stake of more than 9% which he disclosed earlier this month.

Poison pills, also known as shareholder rights plans, are legal maneuvers that prevent shareholders from building their stakes beyond a set point by triggering an option for others to buy more shares at a discount. Invented by famed corporate lawyer Martin Lipton in 1982, they are often used by companies receiving hostile takeover bids to block an unwanted suitor or buy time to consider their options.

In the case of the Twitter pill, if Mr. Musk or someone else took control of 15% or more of Twitter shares, all other shareholders would have the right to buy additional shares for what would be actually half price. That would quickly dilute Mr. Musk’s stake and make buying shares more expensive. The pill, which Twitter said would provide details in an upcoming filing, remains in effect for about a year.

Twitter said in a statement that the rights plan does not prevent the company from engaging with potential acquirers or accepting a takeover bid if the board determines it is in the best interest. shareholders. He confirmed earlier that he had received Mr Musk’s offer and was considering it.

The Wall Street Journal reported Thursday that Twitter is considering installing a poison pill.

Mr Musk may not be the only suitor for the venture, as people familiar with the matter say Thoma Bravo LP and other private equity firms are also making the rounds. But just because they’re running the numbers doesn’t mean either company will make a formal offer or such a deal will materialize.

Taking Twitter private wouldn’t be an easy task; indeed, private equity firms have explored and decided on it in the past. It would rank as one of the biggest leveraged buyouts of all time, and Twitter lacks the attributes of a typical LBO target like strong, stable cash flow. It’s possible the takeover companies are also considering something less than a full takeover.

The New York Post earlier reported Thoma Bravo’s interest in Twitter.

The private equity firm, which specializes in the technology sector and manages around $100 billion, has been busy lately at a time of heightened buyout activity. It agreed to buy Anaplan Inc. for $10.7 billion in March, and SailPoint Technologies Inc. just days ago for $6.1 billion.

Mr Musk, the billionaire founder of Tesla and private rocket company SpaceX, offered to pay $54.20 a share for Twitter and said it was his “best and last” offer. He criticized how Twitter moderates content, among other things, and briefly agreed this month to join its board before stepping down.

Its takeover bid has sparked speculation that a white knight bidder such as another tech company or a private equity firm could emerge as an alternative to a deal with the unpredictable and outspoken entrepreneur.

One possible outcome is Twitter rejecting Mr Musk’s offer as too low but leaving the door open for him to come back with a higher offer, some people said. Mr. Musk said that if the offer was not accepted, he would reconsider his position as a shareholder in the company. He also said he had a plan B, without detailing it.

A big question mark is how Mr. Musk would fund a deal. Although he is the richest man in the world, much of his wealth is tied to Tesla stock and his offer did not contain details of financing plans, which like other aspects of the offer, is unusual. The Journal reported on Thursday that Morgan Stanley would provide debt financing for the offer and that Mr. Musk has received approaches from investors interested in backing it.

“There’s a plethora of multi-billionaires out there willing to fund Elon for whatever he wants to do,” said Joe Lonsdale, a venture capitalist from Austin, Texas, and co-founder of Palantir Technologies Inc.

A big name who does not plan to invest money is Peter Thiel, a longtime associate of Mr. Musk who dates back to when he was an executive at PayPal Holdings Inc. While Mr. Thiel, a colleague billionaire who has invested in several of Mr. Musk’s businesses has expressed broad support to friends for Mr. Musk’s vision for Twitter, he does not plan to back any offerings, according to people familiar with his plans.

Existing Twitter shareholders who support Mr. Musk could also transfer their holdings in any deal.

But in a sign that Twitter investors appear less enthusiastic about Mr. Musk’s bid overall, the company’s shares closed down nearly 2% on Thursday at $45.08. The market was closed on Friday for the Good Friday holiday.

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