Why didn't Musk's $44 billion acquisition of Twitter's | pill plan work?

Hello everyone, I'm the Demon King, today let's talk about Musk's $44 billion acquisition of Twitter, why didn't the poison pill plan work?

On April 25, the world's richest man, Musk, and Twitter reached a preliminary agreement that Musk would buy Twitter's entire company for $44 billion and take it private.

In less than a month, you have to admire such a big deal.

Let's take a look at the timeline:

On April 14, Musk sent a letter to Twitter's chairman and told the Securities and Exchange Commission.

The content of the letter is very short, divided into 4 paragraphs, which can be summarized as follows:

1, I want to invest in Twitter. The reason is that I believe it has the potential to become a platform for global freedom of expression, and I believe that freedom of speech is a necessary condition for democratically functioning society.

2, I want to be the king of Twitter. The reason is that I realize that Twitter is in a very bad situation right now, so Twitter needs to become a private company.

3, I want to pretend to be forced. I want to buy all of Twitter's shares for $54.20 per share in cash.

4, you are all scum. Twitter is broken in your hands, and I'll dig up its potential.

According to the data disclosure of the US Securities and Exchange Commission on April 4, Musk bought 73.5 million shares of Twitter on March 14, holding 9.2% of the shares of the social media platform Twitter, becoming the largest shareholder of Twitter.

Unveiling all this, it is amazing that these signs are not accidental, and a long-planned acquisition drama has been laid.

On the other side of the Twitter company will naturally not sit still, a notice from Twitter's board of directors (the shareholder rights plan, also known as the poison pill plan is launched): the board of directors unanimously approved a one-year shareholder rights plan that expires on April 14, 2023, which can be triggered when the controlling shareholder and the company's board of directors have a disagreement to ensure that all other shareholders realize value.

The content is: If an entity, individual or group acquires beneficial ownership of at least 15% of Twitter's outstanding common stock without the prior approval of the Board of Directors, it will trigger the threshold for exercising the shareholder rights plan described above.

In order to prevent malicious takeovers by listed companies like Twitter, the routine operation is that I don't want you to buy, directly mess up, you are not rich, I want you to pay double the money to pay the bill. The effect is to make the opponent realize that he has to pay a greater price and give up the idea of acquisition, commonly known as the "poison pill plan".

In terms of the current results alone, it has been more than a week, and a preliminary agreement has been reached at $54.2 per share.

This pendulum effect is indeed a bit unexpected, how come I didn't see what effect the "Poison Pill Project" played?

In fact, what attracts me to the business world is not its underlying business logic, such as why did Musk buy Twitter? If you look at the letter he wrote, he believes that Twitter has the potential to become a platform for free speech around the world, and that people in beautiful countries are so beautiful to talk. This is a good hand, and it can talk and live, which makes people unable to refute it.

What really interested me was this "poison pill project", the happy feud between the acquirer and the acquired.

We can nibble on the knowledge points from these three aspects of this drama: First, how did the acquisition happen? Second, what kind of acquisition methods are there? Third, what is the "Poison Pill Project"?

First, how did the acquisition happen?

The occurrence of acquisitions involves two levels, one is the interest motivation and the other is the business behavior.

This is like saying that Lao Ma Company is a social platform, precipitating a large number of users, and he has never been ambiguous on the issue of user conversion and monetization.

It just so happens that the old Qin company is engaged in game research and development, and there are some products on hand, as long as there are users kryptonite gold can make money.

Lao Ma found out about this and directly went to Lao Qin and said, Or I will give you an estimate of the value of your company, give you a sum of money, and you will even package people and products and sell them to me.

Old Qin thought that he had been busy for such a long time, and he was so tepid, it was better to pick up a ready-made one, so that he could realize the freedom of personal wealth or something. So the two discussed it and did it.

Lao Qin sold the game company to Lao Ma and got a sum of money, and Lao Ma used his advantages to divert the users of the social platform to the game, and successfully monetized the end of the product. Since the game was not bad, a large number of users poured in, and the product suddenly became hot, and Lao Ma soon not only earned back the acquisition money, but also made more.

Of course, this is just a simple assumption, and the reality is much more complicated than this. Two products that are not comparable to each other have achieved a win-win situation through a kind of grafting.

For example, the price of $54.2 that Musk gave was 54% premium to the time of his investment and 38% more than when it was announced, and when the news was announced, the market was optimistic about Twitter, and the stock price opened by 25%, and the stock price was 45.08 US dollars.

The logic here is actually very simple, business behavior serves the interest motive. That is to say, we look at people and talk big, but people quietly make money. It's really insiders watching the doorway, laymen watching the bustle.

Second, what kind of acquisition methods are there?

Understanding that the occurrence of acquisitions is a business behavior driven by profit motives, what kind of acquisition methods will there be?

I deliberately went to check the information and made some understanding. This acquisition can be clearly divided into two types: friendly acquisition and hostile acquisition.

A friendly acquisition is when both parties negotiate the price, everyone thinks it's OK, and things are done.

A hostile takeover is that the opposing parties have not negotiated well, and the acquirer has adopted various ways to overlord the hard bow.

The first acquisition method is obviously an ideal state, and the second acquisition method is more complicated.

First of all, if you are a sole proprietorship company, as long as you are not willing, others are basically no problem. But if you are a joint-stock company or a public company, it is much more complicated.

As soon as there are many people, it is difficult to unify opinions, some people agree and some people will oppose, adhering to the principle of minority obeying the majority, as long as the acquirer can get more than half of the equity qualifications, even if you oppose, in fact, he can also be successfully acquired.

Because joint-stock companies and listed companies are not your own account, this is as Musk wrote in the letter said, Twitter company has a lot of shareholders, loose decision-making, not powerful, which is also a common problem of many joint-stock companies and listed companies, but this is not a bad thing.

Joint-stock companies and listed companies are divided into two parts: the board of directors and ordinary shareholders, the board of directors is composed of a small number of shareholder representatives, on behalf of the shareholders' rights to exercise the rights and interests of appointment, supervision, operation and so on, the board of directors members representatives are not necessarily the majority shareholders, so it is also common.

Therefore, when the board of directors does not agree to be acquired, the acquirer can actually bypass the board of directors, negotiate with major shareholders and buy shares through the open market. This practice is to get the right to speak by eating the shares of the enterprise, and then to insert their own people into the board of directors, so as to achieve the purpose of pulling the other party back to the negotiating table.

The holding reached 51%, which is actually up to the acquirer.

Third, what is the "Poison Pill Project"?

In my opinion, the acquisition itself is not a bad thing, and the reason for this kind of resistance is essentially a two-way game, and the price is not negotiated.

For example, I think my company is valued at least 10 billion, but the price given by the other party is only 5 billion, so it is naturally difficult for the two sides to talk about a piece.

Then some people will definitely say, why are there companies that are unwilling to be acquired? And some companies have to buy others? If you don't understand this and that, but you analyze it from the perspective of interest alone, you will have a way of thinking.

For example, once this news is released, will the stock prices of both sides be affected, and will they rise or fall? Is the company's heat going up? Why is the acquisition so tortuous and full of twists and turns? Even if the acquisition is not negotiated, can the parties benefit from it?

Maybe this is just a play between the two sides, because the current profit is not only between the buyer and the seller, but also in the market's valuation of the future of both parties.

At this time, we look at the "shareholder equity plan" designed by Twitter, gave a year of time, and the result was that the price was negotiated in less than a week, although it was really surprising but also reasonable.

Musk has complained about Twitter's bad experiences in the previous time, and more than once used his appeal to conduct a referendum. Just when everyone thought he was going to develop a new Twitter-like platform software, the news of the acquisition began.

This had to be applauded, and it turned out that all this was a premeditated drama.