As Elon musk owns twitter’s stake by around 10.3 percent, Twitter has adopted a ‘poison pill’ on Friday to limit Elon Musk’s ability to raise his stake in the social media platform.
What is Poison Pill?
A poison pill is a defense tactic utilized by a target company to prevent or discourage hostile takeover attempts. They allow the existing shareholders and give rights to purchase additional shares at a discount by diluting the ownership of a new opposing party.
After knowing about what the Poison pill is, let’s see further what is happening,
As Elon Musk purchases a lot of shares of Twitter and owns the company stake by around 10.3%, seeing this, Twitter has activated Poison Pill to bid emerge Elon musk as a buyout firm emerged to challenge his $43 billion (roughly Rs. 3,28,250 crore) bid for the company.
It is not clear how much Thoma Bravo would be prepared for the offer, and there is no certainty that such a rival bid will materialize. A Thoma Bravo spokesperson declined to comment, while Twitter representatives did not immediately respond to a request for comment.
Twitter said on Friday that it has adopted ‘Poison Pills’ that will dilute its significant stake in the company raised to 15 percent by sharing more shares with others at a discount. The poison pill is activated for 364 days, from Friday.
This move will not prevent Musk from directly taking his offer from the twitter shareholders by launching a tender offer. The poison pills will prevent the shareholder from selling their shares, and due to the tender offer, they will be able to agree or disagree with the offer given by Musk.
It remains possible that a private equity firm will boost Musk’s bid by partnering with him rather than challenging him. However, musk’s criticism of Twitter’s reliance on advertising for most of its revenue has made some private equity firms apprehensive about teaming up with him, industry sources said. A strong cash flow makes financing a leveraged buyout much easier.