September 28, 2022

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Twitter board uses 'toxic pill' against Elon Musk

Twitter board uses ‘toxic pill’ against Elon Musk

On Thursday, the CEO of Tesla and the world’s richest person, Elon Musk, announced that he had made an offer to buy all the shares on Twitter. The value of the bid estimated the company at 43 billion dollars, or 375 billion kroner.

The bid price was $54.2, but the exchange was not insured, and the price closed on Thursday down 1.6 percent to $45.08.

Already Thursday evening, rumors spread that Twitter’s board of directors will use the so-called “toxic pill” to prevent a hostile takeover. In short, it’s a strategy to make your company less attractive to unsolicited bidders, in this case Musk, who already owns 9.2 percent of the company.

The confirmation came Friday afternoon Norwegian time from Twitter: The board of directors unanimously adopted a so-called “shareholder equity plan”, which is often described as a toxic pill. The plan is activated if Musk — or another investor — exceeds the 15 percent ownership limit in a deal not approved by the board.

The decision allows existing shareholders to buy new shares at a significant discount, which could weaken Musk and make it difficult and costly for him to buy up to a dominant position in the company. The right to purchase additional shares will apply until April 14, 2023, according to press releases from Twitter.

“The rights plan will reduce the potential for a person or group to gain control of Twitter via the open market without paying an adequate premium to all shareholders, or without giving the board of directors sufficient time to make informed decisions,” a statement from Twitter said.

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Moreover, Twitter wrote that the plan is similar to other plans adopted by listed companies under “similar circumstances.”

Such a plan could force Musk to negotiate directly with the board of directors. Bloomberg wrote that the move is intended to give Twitter’s board of directors more time to evaluate the bid, according to unnamed sources. In the statement, the Twitter board of directors itself wrote the following:

“The Rights Plan does not preclude the Board from engaging in dialogue with the parties or accepting an acquisition offer, if the Board believes it is in the best interests of Twitter and its shareholders.”

Musk recently turned down an offer of a board seat on Twitter, after it became known that he had bought himself into the company’s largest shareholder.. By accepting a seat on the board, Musk will not be able to buy up to an ownership stake of more than 14.9% under the terms.

According to Bloomberg, funds managed by the Vanguard Group are now the largest owner of Twitter, with Musk taking second place.(Conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using a link that leads directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For additional terms look here.