Twitter’s board of directors has issued a new “shareholder rights plan” to block Elon Musk’s proposed buyout offer, a major setback to the billionaire’s efforts to take full financial control of the company.
The plan was adopted “following an unsolicited, non-binding proposal to acquire Twitter,” the company’s board of directors noted in a press release announcing the change.
This maneuver, known in the finance world as a poison pill, blocks hostile takeovers by giving certain shareholders the right to purchase more stock if an outsider attempts to seize control.
The plan strongly suggests that Twitter’s board intends to fight Musk’s bid to take ownership of the company, as previously reported. Twitter CEO Parag Agrawal had previously told employees that the company was still evaluating Musk’s offer.
The board also detailed the plan in a filing to the US Securities and Exchange Commission, although the filing was not available as of press time. The plan will remain in effect for one year.
On April 4th, SEC filings revealed that Musk had accumulated a 9 percent stake in Twitter, becoming the company’s largest individual shareholder. Musk then accepted and abruptly backed out of a seat on the company’s board. As a board member, Musk would have been restricted from acquiring more than a 15 percent share of ownership. Then, yesterday, Musk filed with the SEC his offer to take over the company.
Musk criticized the possibility of board action against the deal yesterday, saying it “would be utterly indefensible not to put this offer to a shareholder vote.” Musk also said in the SEC filing where he announced his hostile takeover bid for Twitter that he “would need to reconsider [his] position as a shareholder” if his offer to acquire did not succeed.
Musk has not articulated his plan for Twitter, but it is widely believed to involve loosening the platform’s moderation policy, which has become a source of conflict in recent years.
In an interview at the TED conference in Vancouver, Musk said his primary motivation was to preserve Twitter’s position as a free speech platform. “Twitter has become kind of the de facto town square,” Musk told the crowd. “My strong intuitive sense is that having a public platform that is maximally trusted and broadly inclusive is extremely important.”