Elon Musk is taking over Twitter for $44 billion. Why did Twitter implement a “poison pill” strategy at first?
Elon Musk, the world’s richest man, agreed to acquire Twitter for $44 billion on Monday, ending a drama that included hostile takeover threats before handing him personal control of one of the world’s most powerful social media networks.
Former US President Donald Trump used Twitter as a platform before being banned. Musk, a self-described “free-speech absolutist,” has indicated he wants to overhaul what he regards as the platform’s overzealous content management.
“Free speech is the core of a functional democracy, and Twitter is the digital town square where issues critical to humanity’s future are debated,” Musk said in a Twitter message.
I also want to make Twitter better than ever by adding new features, opening up the algorithms to increase trust, combating spam bots, and authenticating all humans.”
According to Twitter, the publicly traded corporation will now become a private entity owned by Musk, who negotiated a $54.20 per-share purchase price.
“Twitter serves a function and is relevant to the entire planet. In a tweet, we are immensely proud of our staff and motivated by work that has never been more critical, “Parag Agrawal, the company’s CEO, stated.
Musk secured $46.5 billion in funding last week to complete the deal, and Dan Ives, an analyst at Wedbush Securities, predicted that the board would likely approve his offer earlier in the day because no other buyer could be found.
In an interview with CNBC, he remarked, “This effectively forced back against the wall, and they had to come to the negotiation table.” Around 1915 GMT, the Twitter stock was trading 5.9% higher on Wall Street.
Musk, who has criticized Twitter’s overzealous moderation, bought a 9% interest in the firm in April and then offered to buy the entire company altogether, citing a goal to preserve free speech.
While the board initially stated that it was considering Musk’s offer, it later rejected him. It implemented a “poison pill” strategy that would have made it more difficult for Musk to gain control of the company.
Musk, whose vast wealth originates from the success of Tesla electric automobiles and other projects, said last week that he had secured funding.
Despite Musk’s wealth, the issue of finance had been viewed as a potential stumbling barrier because a large portion of his holdings is in Tesla stock rather than cash.
Musk claimed in a filing that the transaction was made possible by a $13 billion debt facility from a finance consortium managed by Morgan Stanley, a separate $12.5 billion margin loan from the same bank, and $21 billion from his fortune.
Musk’s efforts have sparked optimism about Twitter’s business potential, which has failed to achieve sustainable growth despite its cultural and political clout.
Trust Securities said in a note that Agrawal, who took over as Twitter CEO late last year, has made progress on new monetization tools, including subscription subscriptions, but that “near term, Musk’s engagement carries the danger of undermining those initiatives.”
However, the campaign of the contentious Tesla CEO has alarmed technology and free-speech experts, who point to Musk’s erratic outbursts and history of harassing critics, which contradict his claimed goals.
According to the progressive group Media Matters for America, Trump, who was banned from Twitter after last year’s assault on the US Capitol by his supporters wanting to reverse the 2020 presidential election result, could return if Musk’s purchase goes through.
The group’s president Angelo Carusone said, “Any negotiations to sell Twitter to Musk must include explicit enforceable measures to uphold and sustain existing community standards, including the expulsion of those who violate those standards.”
HOW DID THE MUSK-TWITTER STORY GET STARTED?
Elon Musk announced the purchase of 9.1% of Twitter on April 4, 2022, a thousand years ago. The announcement that the world’s richest man had become (temporarily) the largest stakeholder in his chosen social media platform sent the stock price skyrocketing and many a keyboard clacking.
Musk responded by posting a poll, which he used to collect recommendations for ways to improve Twitter. The corporation replied by providing him with a seat on the board of directors, limiting his ownership to only 15% of the company. Initially, he answered yes. Then he had a change of heart and said no. Meanwhile, Casey Newton and Liz Lopatto, our resident Twitter and Musk specialists, probed deeper into why Musk was flirting with Twitter and what the potential outcomes would be.
AT FIRST, MUSK’S OFFER TO BUY TWITTER DID NOT APPEAR LIKELY.
Casey Newton of Platformer isn’t the only one who doubted Musk would attempt a hostile takeover of Twitter. Following the announcement that Musk had purchased 9.1% of the firm’s stock, many speculated that Musk might try to buy the entire company, only to realize that he had already gotten everything he wanted out of Twitter.
Casey is correct in his assessment that Twitter’s poison pill measures may not be sufficient to deter Musk. However, he also thought Musk would continue to harass the corporation through his tweets, which is still a possibility.
STRAP IN FOR A LONG RIDE, TWITTER EMPLOYEES ARE TOLD.
The first all-hands meeting held by Twitter after Musk’s offer was made public was strange. The company stated it would continue to assess the request after serenading employees with Backstreet Boys and Aretha Franklin.
Employees expressed dissatisfaction with Alex Heath’s lack of a more detailed response. They’re worried about the social media platform’s survival and the risk of layoffs.
AT BEST, MUSK’S UNDERSTANDING OF “FREE SPEECH” IS SUSPICIOUS.
Musk went on stage in Vancouver for a well-timed interview with TED Talk founder Chris Anderson only hours after launching his attempt to buy Twitter. Musk mentioned his “obsession with the truth” during the chat, echoing comments he made in his SEC filing about wanting to defend free speech and democracy.
“IF MUSK IS ABLE TO BUY TWITTER, HE MAY BE IN FOR A RUDE AWAKENING.”
However, as Adi Robertson makes out, his concept of free speech is, at best hazy. She concludes that if Musk succeeds in purchasing Twitter, he may be in for a nasty awakening, based on Musk’s words and recent efforts by Twitter’s administration to deal with speech laws worldwide.
“YOU CAN’T IMAGINE HOW MUCH OF A ROLLERCOASTER RIDE THIS HAS BEEN SO FAR.”
It’s impossible to overstate how much of a rollercoaster ride this has been. He invests in shares! He’ll be joining the board of directors! No, he’s not going to join the committee! He could go out and buy more shares! No, no, he wants to buy the entire Torah! This has more turns than an M. Night Shyamalan film. And we haven’t even reached the midway point.
REPUBLICANS IN THE HOUSE DEMAND THAT TWITTER PRESERVE RECORDS
Republicans are enraged by Twitter’s efforts to sabotage Musk’s tender offer. According to CNBC, House Republicans, led by Rep. Jim Jordan (R-Ohio), are urging the board to keep all transaction records, perhaps paving the way for a future hearing if the GOP obtains control of the House following the midterm elections.
Conservatives have used Twitter as a punching bag, claiming censorship by the social media business based on little evidence.
The board of directors is still considering an Elon Musk buyout, according to Twitter CEO Jack Dorsey.
ON THURSDAY, Twitter CEO Parag Agrawal told staff that the firm was still examining Elon Musk’s $43 billion bid to purchase it and take it private, setting the groundwork for a potentially protracted dispute with the world’s richest man.
According to a person in attendance, Agrawal began a 25-minute Q&A session with employees Thursday after clips of the Backstreet Boys’ songs “I Say A Little Prayer” and “I Want It That Way” were aired. He didn’t indicate when the board would respond to Musk’s offer or which direction it was leaning, which disappointed some who had hoped for a more extensive explanation. He stated that the board would go through a “rigorous process” before making a decision “in the best interest of our shareholders.”
Employees expressed fears about the future of Twitter if Musk were to take over, according to Agrawal, who took over as CEO for Jack Dorsey last November. At least one employee inquired about future layoffs, which Agrawal stated would not be based on individual performance assessments. He said it was too early to predict what would happen to staff stock options if Twitter was taken private in answer to another query. The emergency call took place during a “concentration week” for Twitter staff, during which they were given Monday off and encouraged to focus on projects and attend a few meetings.
Musk had previously blasted the potential of board action against the deal, saying it “would be ridiculous” not to submit the contract to a shareholder vote. Musk said his offer was not about generating money and that he didn’t “care about the economics at all” in an interview earlier in the day at the TED 2022 conference in Vancouver. Instead, he claimed he wants Twitter to defend “free expression” and expose its algorithm to criticism from the outside.
Agrawal’s comments signal that Twitter would not easily yield to Musk’s desires and that a nasty, Succession-style corporate war could erupt in the coming days. Twitter’s board of directors could accept other buyout offers or use a poison pill, which is a traditional method for thwarting hostile takeover attempts. Meanwhile, Musk said at TED that if Twitter rejects his offer, he has a “plan B.”
Even if Twitter can defend itself against Musk this time, employees are already questioning if the company will be able to withstand future takeover bids. When an employee asked, “Are we just going to start inviting any billionaires to our board?” during the all-hands meeting, Agrawal declined.
Twitter implemented a “poison pill” strategy to protect itself from an Elon Musk takeover.
When Twitter revealed a limited-term shareholder rights scheme that could hinder billionaire entrepreneur Elon Musk’s takeover attempt.
Musk, the CEO of Tesla and the world’s richest man, had offered $43.4 billion to buy the social media network, claiming that he wanted to unlock its “amazing potential” to help free expression and democracy worldwide.
In response, Twitter’s board unanimously adopted a strategy in early April to allow current owners to buy the stock at a significant discount to dilute new investors’ interests.
In the financial world, this strategy is known as a “poison pill,” and it signals that Twitter will battle Musk to prevent a hostile acquisition. It would take effect if a shareholder acquired more than 15% of the company in a purchase that the board of directors did not approve, and it would last until April 14, 2023.
Twitter noted in a statement that the Rights Plan “does not exclude the Board from talking with parties or accepting an acquisition deal if the Board feels it is in the best interests of Twitter and its shareholders.”
The billionaire’s retort is the latest twist in a controversy involving the social media site, of which Musk is a frequent user. Musk announced on April 4 that he had secretly acquired a 9.2 per cent interest in Twitter, making him the company’s largest shareholder. After declining, he was offered a position on the board of directors, which was immediately overturned after Musk declined.
Employees at the social media platform have expressed fear about what a Musk-controlled company might look like and dissatisfaction with the fact that the acquisition’s details are still unknown.
CEO Parag Agrawal allegedly told employees at an all-hands meeting on Thursday that the company was not “kept hostage” by the takeover situation. According to Reuters, he instructed colleagues to stay focused and that “we as employees decide what occurs.”
Few experts are ready to predict what will happen next, although a bidding war is possible. According to Reuters, Thoma Bravo LP’s buyout firm contacted Twitter on Friday to express interest in competing with Musk’s bid.
Shortly after Musk announced that he had surpassed Vanguard Group as Twitter’s top shareholder, the latter purchased more shares and now owns 10.3 per cent of the firm. In a post on Friday, Twitter founder and former CEO Jack Dorsey stated that such unexpected transactions are always a risk for the company.
“Twitter has always been ‘for sale’ as a public corporation,” he remarked. “That is the true problem.”
Musk is already facing legal action for his Twitter purchases. One investor is threatening to file a class-action lawsuit against the Tesla CEO for failing to declare his stock transactions before the statutory date. The Securities and Exchange Commission is currently investigating Musk’s investment activities, including suspicions of insider trading based on his tweets.