Such a move is a common way to avoid a potentially hostile takeover by diluting the stake of the takeover entity.
Under the new structure, if any person or group acquires effective ownership of at least 15% of the remaining joint shares of Twitter without the approval of the board, other shareholders will be allowed to purchase additional shares at a discount.
Twitter has adopted a plan for limited shareholder rights, often called a “poison pill,” a day after billionaire Elon Musk offered to buy the company for $ 43 billion, the company announced on Friday.
Elon Musk’s Twitter profile displayed on a computer screen and the Twitter logo displayed on a phone screen are seen in this illustrative photo taken in Krakow, Poland, on April 9, 2022.
“The rights plan will reduce the likelihood that any entity, person or group will gain control over Twitter by accumulating open market, without paying all shareholders an adequate control premium or without giving the board enough time to make informed judgments. cause and take action that is best. the interests of the shareholders “, the company said in a press release.
Twitter noted that the rights plan would not prevent the board from accepting a takeover bid if the board considers it in the interest of the company and its shareholders.
Musk already owns a 9% stake in Twitter, according to a Securities and Exchange Commission case file last week. Shortly after his participation became public, the Twitter CEO announced plans for Musk to join the board. But a few days later, Musk reversed course and eventually decided not to join the board.
If it joined, Musk would not be allowed to accumulate more than 14.9% of the actual ownership of the company’s remaining common shares.
Also Friday, Bloomberg reported, citing anonymous sources, that Twitter launched JPMorgan to help respond to Musk’s offer. Twitter has already worked with Goldman Sachs, and Musk has worked with Morgan Stanley.
Several institutions, including The New York Post, reported that Twitter also expressed interest in Thoma Bravo, although it is still uncertain that an offer will materialize, according to sources who spoke to Reuters.
JPMorgan has a history with Musk, suing Tesla over an issue with its 2018 tweet, claiming it has “secured funding” to take the company private. Tesla later contradicted the bank.
JPMorgan, Twitter and Thoma Bravo declined to comment.
In a live interview at the TED2022 conference in Vancouver on Thursday, Musk outlined his vision for making Twitter algorithms more accessible to the public and limiting content moderation.
He also admitted that he was “not sure” if he would really be able to buy Twitter, although he said he had “enough assets” to fund the business if it was accepted. Despite his wealth, Musk has a large share of his equity-related assets in his companies, including Tesla, which means he will likely have to liquidate or borrow from his assets to get a large sum.
But Musk said there was a plan B if his initial offer to buy the company and take it private, which he called “the best and final,” was rejected. He declined to provide further details in the TED interview.
On Friday, former Twitter CEO and current board member Jack Dorsey wrote on Twitter that the “real problem” is that as a public company, twitter has always been “for sale.”
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