The microblogging app, Twitter has announced the adoption of “poison pill”, a shareholder rights plan which protects the company from corporate buyouts.

Driving the news
Barely 24 hours after the world’s richest man, Elon Musk offered to buy Twitter for $43 billion, the microblogging app’s board of directors adopted the “poison pill” strategy which allows existing shareholders in the company to acquire newly issued shares in Twitter at a discounted price. 

  • The new structure prevents a stakeholder from acquiring a minimum of 15% of Twitter’s stock without the board’s approval. 
  • The new plan is valid until April 14th, 2023.

What this means 
Although Twitter’s board has implemented the poison pill plan, the board can accept an acquisition offer if it is in the best interest of the company’s shareholders.

  • Elon Musk’s offer projects a 20% premium over stock price in 2023.

Background to the story 
On Monday, last week, Elon Musk acquired 9.2% or $2.89 billion worth of Twitter stocks becoming the highest stock owner of the company. A few days later, Vanguard group, an American company, acquired 10.3% of Twitter stocks surpassing Elon Musk. 

  • On Thursday, Elon Musk presented a $43 billion bid to own 100% of Twitter valuing each share at $54.20.

What they are saying
One of the longest shareholders and Saudi Arabian businessman, Prince Al Waleed bin Talal, responded to the offer by saying Elon Musk offer is far from the intrinsic value of Twitter given the microblogging app’s projected growth. 

  • Business analysts believe that Elon Musk has put Twitter in a position that giant companies would be looking to acquire. 
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