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There is an ongoing war between Elon Musk and Twitter that got triggered after the announcement of Poison Pill on Twitter. Elon Musk is known for being a minority stakeholder in this social media platform. Recently, he has offered a buyout proposal that he should buy 100% of the shares for US$54.20 per share in cash. Let's explore deep into the Poison Pill with the U.S. Securities and Exchange Commission and the offer is given by Elon Musk to Twitter.
Elon Musk has asked Twitter to go private for the full support of free speech. He has also mentioned that if this buyout proposal is not possible then he would think about reconsidering the position as a shareholder. Meanwhile, Twitter is not ready to accept Elon Musk's proposal while he owns only a 9.2% stake. It has imposed its strategy to reject this proposal known as Poison Pill after discussing it with the U.S. Securities and Exchange Commission. The strategy is integrated to protect other stockholders from any coercive and other unfair takeover tactics.
Poison Pill helps to prevent any takeover bid by taking away a shareholder's right to negotiate a price for directly selling the shares. This strategy is known for providing shareholders the right to buy more shares at a discount if anyone shareholder tries to purchase a specific percentage of a company's share. Poison Pill forces a bidder to negotiate with the acquisition board to gain some management time for maximizing the selling price.
Twitter has implemented this Poison Pill strategy because the shareholder who triggers this plan can be blocked from purchasing any discounted stocks. Thus, this is the only way for Twitter to prevent Elon Musk from purchasing the whole company. The cost of the bid will rise eventually to discourage Elon Musk from taking over Twitter without the board's approval.
The social media platform has also announced that there will be severe penalties if Musk wants to breach the 15% limit of any investor, after the filing with the U.S. Securities and Exchange Commission. The US$2.5 billion investment of Elon Musk will gradually lose the value and he must spend over US$43 billion if he triggers the Poison Pill on him. It will be very difficult for Elon Musk to take control of Twitter through his buyout proposal in the stock market.
That being said, in the current situation, Poison Pill is the only strategic plan for Twitter to stop Elon Musk from purchasing the entire social and micro-blogging platform.
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