Twitter’s board of directors has approved a provision aimed at preventing a hostile takeover that’s known in the financial world as a “poison pill,” the company announced on April 15.
The board unanimously chose to adopt the “limited duration shareholder rights plan” after an “unsolicited, non-binding proposal to acquire Twitter,” the company said.
Elon Musk, the founder and CEO of Tesla and SpaceX, offered to purchase the California-based firm for around $43 billion this week shortly after buying nearly 10 percent of the company.
Under the approved provision, if any entity, person, or group acquires 15 percent or more of Twitter’s outstanding stock in a transaction not approved by the board, other stock holders will be able to buy additional shares of common stock at a lower price.
The shareholder plan “will reduce the likelihood that any entity, person or group gains control of Twitter through open market accumulation without paying all shareholders an appropriate control premium or without providing the Board sufficient time to make informed judgments and take actions that are in the best interests of shareholders,” Twitter said.
The poison pill method has been approved by other companies in the past to dilute outstanding stock and make a hostile takeover more financially challenging for the potential acquirer.
More details of the plan will be outlined in a form that Twitter will file with the U.S. Securities and Exchange Commission.
The board includes Bret Taylor, co-CEO of Salesforce; Parag Agrawal, Twitter’s CEO; Jack Dorsey, Twitter’s co-founder; and Mimi Alemayehou, a senior vice president at Mastercard.
Mark Meckler, former acting CEO of Parler, a Twitter competitor, told NTD that whether or not Twitter’s action works depends on whether people take advantage of it.
Musk had said on Twitter, responding to a rumor that the company was considering implementing such a provision, that the move could expose the board to a “titanic” amount of liability because they would be “breaching their fiduciary duty.”
