In the past few hours, Musk’s hostile takeover to grab the blue canary’s social network, subject to increasing resistance, met with the formal rejection of the platform’s Board of Directors, which is preparing to resist for a year with the poison pill procedure: let’s find out together what it deals with.
In the past few hours, the social network Twitter, grappling with a hostile takeover attempt by the billionaire Elon Musk, has communicated its intention to resist through a very common practice in the economic field: at the moment, the reactions of the aspirant are not yet known buyer, to date the largest single shareholder of the 280-character microblog.
The first novelty of the “Musk-Twitter telenovela” comes from the world of analysts. In particular, Mark Kelley of Stifel has qualified the whole story as a “circus” that will end either with the billionaire who will buy the social network, or with the same one who will sell his 9.2%. In this case, however, Twitter’s shares would have a real downside risk and, consequently, as also done by other analysts, has downgraded (in technical jargon: downgrading) the platform’s shares, in the name of a decision that, raising doubts about the creditworthiness of the company in question could have consequences for the cost of borrowing for the company in the case of the issuance of securities.
Meanwhile, in the meantime, further expressions of interest in the blue canary’s social network emerge (an offer could be presented, according to what was formally communicated, also by Thoma Bravo, a private equity company that last December managed something like 103 billion dollars in asset), Twitter’s board of directors has given substance to the statements of CEO, Parag Agrawal, who had argued in Thursday’s meeting with employees that the company would not be held hostage by Musk’s move.
In particular, thanks to the fact that its statute provides for the possibility of issuing “preferred shares in blank check without prior authorization”, in judging the action taken by Musk as “unwelcome” and with the intention of “fighting it”, has launched what, in the economic sector, is a procedure known as the “poison pill”.
In particular, to dilute Musk’s shareholding, the BoD has established that, in the event that a subject (group or person) acquires at least 15% of the ordinary shares of the company available in the free market, without the authorization of the BoD (which would require of “sufficient time to make informed judgments and take actions that are best in the interests of shareholders”), and without an appropriate shareholder reward, shareholders will be able to buy additional shares of the platform at a discount.
Also the “poisonous pill”, valid for 364 days, would prevent shareholders from selling their shares, forcing Musk to submit a takeover bid that would offer shareholders ease to show disapproval or support for the offer of the naturalized South African American billionaire. Specifically, the poison pill system, Twitter said, would not prevent the Board from accepting a possible acquisition offer, in the event that it deems it the best, in the interest of the shareholders and the company itself.