Twitter does not want to become the toy of the richest man in the world.
So, on Friday, they resorted to a tried and tested corporate defense mechanism, invented in the 1980s – the heyday of the corporate raider – to block a potential attempt to take over Elon Musk and buy some time.
The mechanism, known as the poison pill, has a simple intention: to make it less acceptable for a potential buyer to follow the target company if the buyer accumulates shares above a certain threshold. In the case of Twitter, if Mr. Musk bought more than 15% of the company, Twitter would flood the market with new shares that all shareholders, except Mr. Musk, could buy at a reduced price.
This would immediately dilute Mr Musk’s stakes and make it much more expensive for him to buy the company. Mr Musk currently owns just over 9% of Twitter shares.
Twitter said its plan would be in effect for just one year. The tool will not prevent the company from having discussions with any potential buyer and will give it more time to negotiate an agreement that Twitter’s board of directors believes best reflects the company’s value.