Avoiding the same mistakes, Twitter activates the “poison” defense strategy to prevent Elon Musk from taking over the company
On April 16, Twitter said it had adopted a defensive strategy called “poison” to prevent hostile takeover plans. The move comes after the world’s richest billionaire, Elon Musk, a close friend of Twitter founder Jack Dorsey, made an offer to take the company private and would make it a bastion of free speech. .
Accordingly, the Twitter Board of Directors agreed that a plan to give existing shareholders the right to buy more shares at a discount, thereby diluting the influence of the hostile party, will be activated when one party buys 15 % of shares in the enterprise without the prior approval of the Board of Directors. This plan is valid for 1 year.
With the “poison” defense, whoever takes control of this social network through the accumulation of shares on the open market must pay all shareholders an appropriate control fee. According to experts, this is a powerful tool for a business to fight the risk of being acquired.
This plan comes after Elon Musk, the world’s richest man, made an offer to privatize Twitter for $ 54.2 per share, equivalent to a company valuation of $ 43 billion. Musk also said that this is his “best and last” offer. Before that, Musk bought more than 9% of Twitter shares through the matching method on the exchange.
In fact, Twitter considers Elon Musk to be an Active Investor. This is a term for investors who buy and hold a large number of shares in a business and hold positions on the board of directors to bring about major changes in that business. A business can become a target for active investors if it is mismanaged, has excessively high operating costs, or can become more efficient if it goes private. Active investors believe they can overcome to increase business value.
With what Elon Musk claims, the richest billionaire in the world can completely make Twitter leaders feel worried. That’s also why they came up with a “poison” defense to prevent this from happening.
This isn’t the first time Twitter has been targeted by active investors. In the past, Paul Singer, founder of Elliott Management, jumped at an opportunity when founder Jack Dorsey scattered his interest in the business to buy large amounts of stock and put pressure on Twitter’s operations. Dorsey is a close friend of billionaire Elon Musk.
By not holding voting shares to control the company for life, Dorsey was unable to stop outside ambitions with Twitter. Despite finding common ground between Elliott and Twitter’s leadership, it is believed that this was the catalyst that caused the Dorsey founder to leave with a decision in November 2021. At that time, Dorsey also had great interest in Bitcoin, not Twitter.
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