Panicked CEO Parag Agrawal and many other Twitter board members have concocted a scheme to attempt to block hostile takeovers.
This could be laying the groundwork to fend off Elon Musk’s hostile takeover bid. It’s unclear to us if he were to raise his offer or get more aggressive if Twitter will have the legal grounds to 100% stop the Tesla CEO from taking over Twitter, but they certainly don’t appear to want it to happen.
Surely they are also concerned, however, about possible lawsuits from angry shareholders if they refuse the deal and Twitter stock tanks into the 30s, which is quite possible according to more than one prominent analyst as we have reported.
Being dubbed a form of a “poison pill” strategy by some, Twitter is adopting what’s called a “shareholder rights plan”. The plan is for a limited duration of one year. The board voted unanimously to adopt this plan. This may add doubt to speculation that Jack Dorsey was potentially in support of Elon Musk’s latest business moves, although it’s unclear to say for sure exactly what he’s thinking.
If any person or group acquires more than 15% of Twitter stock without approval from the board, other Twitter shareholders will be able to buy more Twitter stock at a discounted price, effectively diluting the shares and making it tougher for a hostile takeover to take place.
It appears this is a temporary plan to “buy time” for Twitter to look at all their options. The board could still potentially accept Musk’s current offer, or reject it if either a better one comes along, or they can come up with a good enough reason to convince shareholders that it’s not in their best interests for the board to accept Musk’s offer.
This news doesn’t actually mean that this possible takeover is over, but it gives the board more control and flexibility in the meantime while they “strategize”. It sends a signal to us that they aren’t ready to accept Musks’ offer, but they also understand the consequences of not accepting it could be bad as well.
As Americans head into a holiday weekend, many Twitter employees will likely have to cancel their plans for emergency meetings, phone calls, and huddle sessions as many angry and nervous investors and employees scramble to try to figure out what they will do next.
In the meantime, we feel Musk already saw a situation like this coming, and he has already gone on record to state that he doesn’t like to lose and has not only a plan b, but sufficient assets to get what he wants to be done within reason.
“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 stated in a recent press release.
As it pertains to what co-founder and board member Jack Dorsey thinks, he recently put out a cryptic tweet. There is a possibility that in our speculation, the unanimous decision was made by different people for different reasons.
Perhaps some don’t want Musk taking over at all, and perhaps others simply want to make sure that any buyout leading to the taking of the company private is worth enough money per share for it to be a “good deal” for long time shareholders who may care more about money than anything else at this pivotal time.
Dorsey tweeted:
“as a public company, twitter has always been “for sale.” that’s the real issue.”
as a public company, twitter has always been "for sale." that's the real issue.
— jack⚡️ (@jack) April 15, 2022
Although Dorsey apparently supported the poison pill vote, it almost sounds like he is also in support of Musk somehow, but again, we can only speculate. Some leftists on Twitter appear to be “rejoicing” as well, although this saga is surely not “done” by any means.
More from CNBC here.
This story may be updated as things continue to develop.
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