Block Musk, Twitter "poison pill plan" details are coming!

On Friday, April 15, U.S. stocks were closed for a day due to the long Easter weekend.

Recently, the social media giant Twitter, which has attracted much attention because Tesla CEO Musk intends to become a "barbarian at the door", issued an announcement giving details of the "poison pill plan" to prevent hostile acquisitions.

Image source: neowin

01

Twitter launched the "Poison Pill Project" to block hostile takeovers

Twitter's board of directors unanimously approved a one-year shareholder rights plan expiring on April 14, 2023, which can be triggered in the event of a disagreement between the controlling shareholder and the company's board of directors to ensure that all other shareholders realize value, the announcement said.

Among them, if an entity, individual or group acquires beneficial ownership of at least 15% of Twitter's outstanding common shares without the prior approval of the Board of Directors, it will trigger the threshold for exercising the shareholder rights plan described above.

Then, with the exception of the entity, individual or group that triggers the exercise of the plan, the remaining existing shareholders may purchase additional ordinary shares of the company at a certain exercise price, and although they are not sure what the exercise price is, they have the right to increase their holdings of common shares with a market price of twice the exercise price at that time.

The move, the company said, would reduce the likelihood that any entity, individual or group would gain control of Twitter through secondary open market accumulation, and that the former would have to pay an appropriate control premium to all shareholders and give Twitter's board of directors enough time to make informed judgments and take actions in the best interests of shareholders.

The "poison pill plan" is one of the common means to deal with hostile takeovers, and the ultimate goal is to effectively dilute the equity of the initiators of the hostile takeovers. Because the remaining shareholders can buy additional shares at a discounted price for a limited time, the acquisition becomes more expensive and complicated.

Twitter explicitly acknowledged that the approval of the shareholder rights plan was due to "the receipt of an unsolicited, non-binding takeover offer from the other side." However, if the board believes that the acquisition is in the best interests of Twitter and its shareholders, it can eventually accept the offer.

02

Added JPMorgan Chase, who had a festival with Musk, as a consultant

According to the latest media reports, Twitter has hired JPMorgan Chase and Goldman Sachs as advisers, and Musk has hired Morgan Stanley as his financial adviser.

JPMorgan Chase is helping Twitter negotiate with potential buyers, including tech-focused private equity firm Thomas Bravo.

Some analysts said that Twitter's introduction of JPMorgan Chase may have been deliberate, because the largest U.S. bank in assets and Musk's electric car giant Tesla are involved in the lawsuit, some of which are related to Musk's misrepresentation on Twitter in 2018 to take Tesla private.

03

Wall Street doubts that Musk's acquisition will not succeed

On April 4, Tesla CEO Musk publicly disclosed that he held 9.2% of Twitter's outstanding shares, becoming the latter's largest individual shareholder and largest external shareholder, and Twitter's stock price soared 27% on the same day, the best single-day performance since the first day of the IPO closed in 2013.

Subsequently, Musk was invited to Twitter's board of directors, and at the time, some analysts said that during the 90 days of his tenure as a director and the end of his term, Musk could not become the beneficial owner of more than 14.9% of Twitter's issued common stock, which could prevent the world's richest man from taking a controlling stake in Twitter.

But a few days later Musk said he didn't want to join Twitter's board and simply proposed buying Twitter in full cash at $54.20 a share, equivalent to an 18 percent premium, on Thursday, valuing the latter company at about $43.4 billion, but he didn't say how to pay the huge sum.

Observers also note that Wall Street actually does not welcome Musk's takeover proposal, with Twitter closing down 1.7 percent on Thursday.

According to CNBC, the stock price of the target that was sought to be acquired at a premium fell instead, "this is not common", indicating that investors remain highly skeptical about this. Brokerage Stifel even downgraded Twitter to "sell" directly because of Musk's influence.

Saudi Prince Al Waleed bin Talal Al Saud, Twitter's well-known major shareholder and billionaire investor with a 5.2 percent stake, previously said he did not think Musk's purchase price was close to Twitter's intrinsic value and rejected the offer.

Twitter closed lower or suggested that the market thought the deal could be rejected or failed, and Musk acknowledged on Thursday that he was "able to actually buy Twitter."

Wall Street Insights has mentioned that once the "poison pill plan" is adopted, it will have at least two effects: first, it will have a deterrent effect on hostile acquirers; second, there will be fewer acquirers interested in companies adopting the plan.

There are also analysts that the "poison pill plan" will not necessarily prevent Musk's acquisition offer, but can encourage him to come to the negotiating table with the company.

Mizuho Securities said that while Musk's assessment of Twitter's monetization potential is not fully exploited, it is expected that the company's board of directors and major shareholders will reject the acquisition proposal due to disagreements with Musk's philosophy. One big concern the board may be concerned about is musk's limited time to give to Twitter because he is the CEO of several tech companies such as Tesla, SpaceX and The Boring Company.

04

Musk hinted at or sold his holdings

Musk said on Thursday that it was the "best and ultimate" acquisition offer he could offer, and that if the bid failed, he would reconsider his investments, seemingly saying he wanted to sell his shares and use his fan clout to send Twitter's stock tumbling:

"If the deal doesn't go through, given that I don't have confidence in Twitter management and I don't believe I can drive the necessary changes in the open markets, I will need to reconsider my position as a shareholder."

David Trainer, CEO of stock investment research firm New Constructs, believes that Musk may not be proposing to buy Twitter to increase shareholder value, but only to gain attention:

He offered to buy Twitter just because the platform is Musk's most popular place. Aside from his status as a 'rock star,' Musk hasn't brought any operational value to Twitter shareholders, which isn't enough to change the company's growth in the long term." ”

05

Musk "revenge" for good friends?

The board also met on Thursday to discuss the acquisition, and Parag Agrawal, who succeeded Twitter co-founder Jack Dorsey as CEO last year, told employees that the company was not "held hostage" by Musk's proposal.

There is also analysis and speculation that Musk suddenly jumped out to be a "barbarian at the door", or it may be a "revenge" for jack Dorsey, a good friend who suddenly resigned as CEO last year. The two have been friends for years, are like-minded in many ways, including cryptocurrencies, and often interact on Twitter.

Jack Dorsey's departure may have been related to being forced into the palace by other activist investors in previous years.

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This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, opinions or conclusions in this article are appropriate for their particular situation. The market is risky, investment needs to be cautious, please judge and make decisions independently.

The drama is getting more and more exciting