Things have shifted in Twitter soon after Elon Musk made a bid for a hostile takeover. The Twitter board seems to have activated the ‘poison pills’ to wrestle back control from the SpaceX CEO.
Poison pills, which are also known as shareholder rights plans, typically trigger an automatic stock dilution through a flood of new shares if a corporate raider’s ownership stake grows too large.
On Thursday, asset manager Vanguard Group increased its stake to 10.3 percent of Twitter, overtaking Musk who was previously the highest shareholder with a 9.1 percent stake of the company.
Tekedia Mini-MBA edition 14 (June 3 – Sept 2, 2024) begins registrations; get massive discounts with early registration here.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
The development came on the heels of Musk’s $43 billion bid for a total takeover of Twitter. The Tesla CEO announced Thursday morning he intends to buy the microblogging app and take it private as it is the only way to guarantee free speech and growth for the platform.
The Twitter board met on Thursday afternoon to consider Musk’s bid. The company issued a statement saying that “The Twitter Board of Directors will carefully review the proposal to determine the course of action that it believes is in the best interest of the Company and all Twitter stockholders.”
Vanguard, led by CEO Tim Buckley, increased its stake in the company at some point during the first quarter, according to SEC filings made on April 8.
Vanguard previously reported owning 67.2 million shares of Twitter or about 8.4 percent of the company as of the end of December, according to FactSet. Vanguard’s holdings are now worth $3.78 billion, based on Twitter stock’s closing price on Wednesday.
The move is seen as an indication that Musk’s bid will have a little chance at success as a shareholder has openly rejected the offer. Saudi Arabian Prince Alwaleed bin Talal, who claims to be a long-term Twitter shareholder, said the offer doesn’t come close to Twitter’s value and thus rejected it.
https://twitter.com/Alwaleed_Talal/status/1514615956986757127
Musk fired back, questioning the kingdom’s interest in Twitter given its repressive laws. ‘How much of Twitter does the Kingdom own, directly & indirectly? What are the Kingdom’s views on journalistic freedom of speech?’ Musk asked bin Talal.
Twitter employees are reportedly not happy about the bid. The worried workers said “Musk would decimate Twitter’s brand and reputation, especially if he were to re-admit controversial figures jettisoned from the platform, should he be successful with an unsolicited bid.”
Vanguard Holdings has a reputation of siding with Twitter management on voting issues, and does not usually advocate for changes like a hedge fund or activist investment, according to Wall Street Journal. This means that the company’s move to increase its shares is aimed at thwarting Musk’s takeover bid.
Musk has been trying to rally the support of Twitter users. On Thursday afternoon, he tweeted a poll, asking: “Taking Twitter private at $54.20 should be up to shareholders, not the board.”
Over 80 percent of the one million votes cast in the first hour said yes. Musk then tweeted: “I love you.”
He also shared a Goldman Sachs’ equity research document on Twitter’s Q4 2021 performance, to reinforce his argument that his takeover bid should be accepted to make Twitter thrive.
https://twitter.com/elonmusk/status/1514726980909948928
In separate tweets, Musk argued that it “would be utterly indefensible” not to allow shareholders to vote directly on his plan. “They own the company, not the board of directors,” he wrote.
However, the bid is facing mounting hurdles, suggesting that it is unlikely going to get the nod. Wall Street Journal reported, citing sources, that the Twitter board is considering thwarting Musk’s takeover bid with the “poison pill” provision.
Twitter shares have reacted mildly to the development, closing down 1.68 percent on Thursday after a volatile session. The shortened trading week ended at $45.08, nearly $10 below Musk’s offer price of $54.20, signaling that markets do not see the chance of his bid succeeding.