Twitter Inc on Friday adopted a limited-duration shareholder rights plan to protect itself from billionaire entrepreneur Elon Musk’s $43 billion cash takeover offer.
Musk made the bid on Wednesday in a letter to the board of Twitter — the micro-blogging platform that has become a global means of communication for individuals and world leaders — and it was made public in a regulatory filing on Thursday.
After his TED talk on Thursday, Musk hinted at the possibility of a hostile bid in which he would bypass Twitter’s board and put the offer directly to its shareholders, tweeting: “It would be utterly indefensible not to put this offer to a shareholder vote.” Under the plan, also known as a ‘poison pill’ strategy to resist a bid from a potential acquirer, the rights will become exercisable if anyone acquires ownership of 15 per cent or more of Twitter’s outstanding common stock in a transaction not approved by the Board.
The rights plan will expire on April 14, 2023, Twitter said.
According to analysts and shareholder activists, Musk could alter the course of the social media company as the management battles a set of proxy proposals focused on topics from civil rights to politics at its upcoming annual meeting.
Whatever the outcome of Musk’s bid to buy Twitter outright announced on Thursday, investors with opposing political views described the billionaire entrepreneur as likely to work to undo some of the restrictions on content that Twitter has imposed as it attempts to promote free speech while combating hate speech and false information.
Even if he fails to buy Twitter, the Tesla CEO, who recently disclosed a 9.6 per cent stake, is seen as likely to vote in ways that could shake up the company at its virtual May 25 meeting, said people who follow corporate governance issues.
“Given where Musk has positioned himself relative to the strategy of Twitter and given he wants to be something of a disrupter, I don’t see him voting with management very often,” said Brian Bueno of Farient Advisors, a corporate governance and executive pay consulting firm.
Musk said his offer price of $54.20 per share was meant to promote open discourse. At the virtual meeting, he will control the second-largest stake after Vanguard Group, enough to give either investor a kingmaker role in close contests.
Musk did not immediately respond to requests for comment on how he might vote at Twitter.
Musk’s star power will likely draw much attention to event, said Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware. “He’s a well-known individual in the middle of all this, so it will increase the interest in voting and could have a big impact,” Elson said.
Although Twitter on Friday adopted a shareholder rights plan to defend itself against Musk, Elson said its impact on the voting might only be to make proxy advisers, which tend to frown on such so-called “poison pills,” more skeptical of management.
Twitter faces five shareholder proposals, all opposed by management, dealing with topics drawing much investor attention.
Two are from conservative groups, one asking Twitter to report on its impact on civil rights and the other on its lobbying activities. Scott Shepard, a fellow at the right-leaning National Center for Public Policy Research think tank, one of the sponsors, called Musk’s offer “terrific” for shareholders.
