Topline

Twitter introduced Friday that it has determined to undertake a restricted length shareholder rights plan, generally known as a “poison tablet,” in response to Tesla CEO Elon Musk’s $43 billion acquisition provide a day earlier—because the social media firm prepares to withstand a possible hostile takeover.

The transfer comes a day after Musk’s unsolicited $43 billion provide to purchase the corporate.

Picture by Martin Schoeller, Illustration by Forbes

Key Details

Twitter’s board of administrators voted unanimously to undertake the shareholder rights plan, typically referred to as a “poison tablet,” which is usually used to fend off hostile takeovers by diluting shares.

Beneath the brand new plan, if any shareholder acquires greater than a 15% stake in Twitter with out the board’s approval, different shareholders shall be allowed so as to add to their stakes at a reduced value.

The plan, which is “much like different plans adopted by publicly held firms in comparable circumstances,” expires on April 14, 2023.

Twitter is clearly gearing up to withstand any unwarranted takeover, with the choice coming a day after Tesla billionaire Elon Musk made an unsolicited $43 billion provide to purchase the social media firm and take it non-public.

The board did notice that the poison tablet wouldn’t stop it from accepting a future acquisition provide, nevertheless, so long as it’s deemed to be “in one of the best pursuits of Twitter and its shareholders.”

Essential Quote:

“The Rights Plan will scale back the chance that any entity, particular person or group positive aspects management of Twitter by way of open market accumulation with out paying all shareholders an applicable management premium or with out offering the Board ample time to make knowledgeable judgments and take actions which can be in one of the best pursuits of shareholders,” the corporate stated in a press launch.

What To Watch For:

A number of Wall Road analysts just lately downgraded Twitter inventory, warning that Musk’s takeover bid places the corporate in a tough place. Stifel grew to become one of many first to concern a promote ranking on Twitter shares amid a “full blown Elon circus,” whereas KeyBanc analysts warn the bid might “go up in smoke” and a possible sell-off might ensue if Musk decides to money out.