After buying a 9.2% stake in the social media platform, Musk briefly became its largest shareholder and was offered a seat on its board before it was pulled away at the last minute.
Employees were already protesting Musk having such a large portion of the company when, on April 14, Musk tweeted an SEC filing in which he offered to buy the company at $54.20 a share cash or $43 billion.
“Twitter needs to be transformed as a private company,” the Tesla (TSLA) – Get Tesla Inc Report executive and richest person in the world tweeted. Musk’s current net worth is currently pegged at $274 billion.
The move sent shockwaves through both employees and users.
During an emergency all-hands meeting on April 14, current chief executive Parag Agrawal told workers that Twitter would not be “held hostage” by Musk.
What Is Twitter’s Poison Pill Strategy?
A day later, Twitter revealed a strategy known in finance circles as a poisoned pill.
It is a limited duration shareholder rights plan that prevents a takeover against the management’s wishes, by letting shareholders buy new shares at a discount when any one person takes on more than 15% of the company’s stock.
On April 15, Twitter’s board unanimously voted in support of such a plan lasting until April 14, 2023.
“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,” the social media platform announced in a press release on Friday.
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The board retains the right to accept an acquisition offer if it considers it to be in the best interests of the company.
FactSet analysts put Vanguard Group, Morgan Stanley Investment Management and BlackRock Fund Advisors as Twitter’s other biggest shareholders at present.
The Musk-Twitter War Is Just Beginning
It is unclear whether Musk, who is known for rocking the boat and making provocative declarations, will follow through with his plans.
But he is clearly using his astronomical wealth to wage a war against the company’s management.
A few hours after posting his intent to buy, Musk held a Twitter poll asking whether his 82 million followers agreed that privatizing Twitter “should be up to shareholders, not the board.”
As of April 15, 83.6% of respondents agreed.
But the problem with such a takeover is the amount of control Musk could have over a platform that is so widely used across the world.
The future of the company’s 8,000-plus employees, as well as its millions of users, could be susceptible to the whims of a tech mogul who is known to make sudden and inexplicable decisions.
The question then is what Twitter’s current management will do to navigate the sights Musk has set on the company in the coming year.
Amid Musk’s tweets, Twitter shares have dropped 4.69% in the last five days.
“As a public company, Twitter has always been ‘for sale,’ former Twitter CEO and current board member Jack Dorsey wrote under a post accusing him of selling Twitter to “fiat maximalists.” “That’s the real issue.”