Twitter's Poison Pill

Twitter does not want to become a plaything of the world’s richest person.

So on Friday, it turned to a tried-and-tested corporate defense mechanism invented in the 1980s — the heyday of the corporate raider — to block a potential takeover attempt by Elon Musk and buy its board some time.

The mechanism, known as a poison pill, has a simple intention: to make it less palatable for a potential buyer to pursue the target company if the buyer accumulates shares above a certain threshold. 

In Twitter’s case, if Mr. Musk bought more than 15 percent of the company, Twitter would flood the market with new stock that all shareholders except Mr. Musk could buy at a discounted price.

That would immediately dilute Mr. Musk’s stake and make it significantly more expensive for him to buy the company. Mr. Musk currently owns a little more than 9 percent of Twitter’s stock.

Twitter said its plan would be in place for just shy of one year. The tool will not stop the company from holding talks with any potential buyer, and will give it more time to negotiate a deal that Twitter’s board believes best reflects the company’s value.  READ MORE...