Twitter says it has adopted a limited duration shareholder
rights plan, known as a “poison pill”.
In a statement on Friday, the company said its board of
directors voted unanimously to adopt the strategy.
The poison pill is often used to intercept hostile corporate
bids by diluting the stake of the entity eyeing the takeover.
The development comes a day after Elon Musk, the billionaire
founder of Tesla Inc., offered to buy the company for $43 billion.
Under the new structure, if any person or group acquires
beneficial ownership of at least 15 per cent of Twitter’s outstanding common
stock without the board’s approval, other shareholders will be allowed to
purchase additional shares at a discount.
The plan is set to expire on April 14, 2023.
“The Board adopted the Rights Plan following an unsolicited,
non-binding proposal to acquire Twitter,” the statement reads.
“The Rights Plan is intended to enable all shareholders to
realize the full value of their investment in Twitter.
“The Rights 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 added that the rights plan would not prevent the
board from accepting an acquisition offer if the board deems it in the best
interests of the company and its shareholders.
Commenting on the development, Dan Ives, Wedbush analyst,
said the poison pill is a “predictable defensive measure” for the board,
although it will not likely “be viewed positively by shareholders given the
potential dilution and acquisition unfriendly move”.
Musk had announced a 9.2 per cent stake in the company
earlier this month, making him the largest shareholder.
But he has been bumped out of the top spot by Vanguard
Group.
Musk had said he has a Plan B if his offer is rejected.
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