After Elon Musk’s offer to completely own Twitter, the company has been thinking of a way to prevent him from taking this huge step. The only solution to this has so far been believed to be Twitter’s Poison Pill, the strategy that Twitter is going to apply in its defense against Elon Musk.
As you must be aware that Elon Musk has offered Twitter an amount of $43 Billion for all Twitter’s shares, Twitter has been in deep thought since then to prevent this from happening. From the looks of it, Elon Musk is so committed to buying the company that any preventive measures are not going to work to stop him from getting what he wants.
Finally, after an intense discussion with all the Twitter shareholders, Twitter’s CEO, Parag Agarwal, has decided to use the strategy of Poison Pill against Musk. Still, confused about what is Poison Pill Twitter and how it is going to work for shattering Elon Musk’s plans of buying Twitter? All your questions will be answered here. Keep reading.
What Is Twitter’s Poison Pill?
Twitter’s poison pill strategy is to be implied against Elon Musk’s intentions to buy Twitter. The poison pill strategy is used by a company to prevent a new hostile shareholder from owning the whole company.
It is not the first time a company is implying such a strategy, Netflix and Papa John’s also deployed the same strategy when they felt the need to prevent someone from gaining control over their company.
Under this strategy, the company offers its shares at discounted prices to its existing shareholders in order to dilute the shares of the shareholder who is willing to buy all the shares to become the owner.
Types Of Poison Pill
There are two options in which a company can deploy the Poison pill strategy: the Flip-in poison pill and the Flip-over poison pill.
- Flip-In Poison Pill – under this option, all the shareholders except the acquirer are allowed to buy more shares at a discounted price. This way, the shares of the acquirer get diluted and they are left with a limited number of shares.
- Flip-Over Poison Pill – if a company chooses a flip-over poison pill, the target company is allowed to purchase the shares of the acquiring company at a highly reduced value. It is comparatively risky so the flip-in method is more preferred by the companies.
Right Now, Twitter is using the Flip-in poison pill against Elon Musk.
What Is Elon Musk’s Response To Twitter’s Poison Pill?
After Twitter’s decision of using the Poison Pill strategy in their company, Elon Musk didn’t immediately give any reaction to it. But, on Thursday, Elon Musk tweeted and he is clearly indicating that he is ready if this leads to a legal battle.
Elon Musk already offered $43 billion for the whole company, whose current value is $36 billion, which means Elon Musk is already offering $7 billion more than its value. The fact that he is ready to offer this extra amount clearly shows that he has a strong determination towards buying the company and he will not let it go off his hands so easily.
Elon Musk showed his discontent and disagreement with Twitter’s Poison Pill, saying that this is against their fiduciary duty to take any action that is not in the best interest of a shareholder of the company.
Will Twitter’s Poison Pill Stop Elon Musk From Buying Twitter?
The strategy that Twitter has planned against Elon Musk seems to be quite rigid. Once the other shareholders buy more shares of Twitter at discount, the value of Elon Musk’s Twitter shares will decrease and he will not be able to easily buy the whole company.
It looks like Twitter’s poison pill is going to provide a strong effect that Elon Musk can’t escape. But, it appears that Elon Musk already has a plan B against this poison pill which is not known yet, but Musk is not going to wait any longer to unleash it.
Presently, it can’t be said of Elon Musk if he will be able to take over Twitter or not. But, all we know is that Elon is very dedicated to buying the platform and if he wants something, he, by all possible means, will try to obtain it in any condition.
Twitter’s poison pill is a huge step to prevent Elon Musk from owning the company. But it will work or not, only time will tell this. What are your views on this? Will Elon Musk be able to buy Twitter or will Twitter’s poison pill strategy work effectively against Musk? Tell us in the comments below.
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