Twitter Inc (NYSE:TWTR) has managed to deflect Elon Musk’s $41 billion offer to stay public, but the eager entrepreneur has one more option to buy the social network. A long duel between Musk and the board is the most likely scenario.
Defensive Move
As reported by CNN Business, the Twitter board announced Friday the implementation of a “poison pill,” which is a shareholder rights plan that would make the company harder and more expensive to acquire. The purpose is to deter Musk or any potential bidder from buying the company.
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The plan was filed with the Securities and Exchange Commission (SEC) and will be in effect for almost a year. According to the filing, if any investor wants to expand their stake in the company to 15%, all other shareholders would be able to acquire an additional share for each share they own at a lower price.
“While other shareholders executing their rights to buy new stock under the plan would have to pay $210 for each new share they purchased, Musk (or another hostile investor) would have to pay $420,” CNN reports.
At present, Elon Musk has a 9% stake in Twitter, and he made an offer to buy all the remaining shares for $54.20 apiece in a bid totaling $41 billion.
A “Plan B”
As the two parties grapple for control, “This all now becomes ‘a game of high stakes poker’ between Musk and Twitter’s Board with this upcoming week likely an eventful one as we expect to formally hear from both parties on their next move in this MMA battle for Twitter,” Wedbush analyst Dan Ives said.
As the poison pill plan will pose a bigger challenge for Musk, the billionaire could withdraw his offer and instead choose to stomp his influence by remaining one of Twitter’s largest investors.
However, experts have taken notice of Musk’s “love me tender” tweet on Saturday, hinting that he could try to circumvent the board by offering a tender offer —which would see him massively buy stock from other shareholders.
According to said Ele Klein, partner and head of the M&A and Securities Group at law firm Schulte, Roth & Zabel, “The theory of that is that if shareholders tender to that condition, he hasn’t violated the poison pill because he’s not closing it.”
“If enough people tender he can say to the company, ‘Look, I have the shares ready to be given to me, the only reason they can’t is because you, the board, are blocking the will of the shareholders.’”
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