Twitter Expected to Employ Poison Pill to Counter Musk Takeover

Twitter was expected to unveil its counterattack against Elon Musk as soon as Friday by putting in place a corporate maneuver known as a poison pill, according to two people familiar with the company’s plans who were not authorized to speak publicly.

The strategy would aim to slow or block Mr. Musk’s $43 billion bid to buy Twitter.

A poison pill, devised by law firms in the 1980s to protect companies from corporate raiders, essentially lets a takeover target flood the market with new shares or allow existing shareholders to buy them at a discount. That means anyone trying to acquire the company must buy up many more shares to gain control.

The details of how Twitter’s poison pill would be designed were not known.

On Thursday, Mr. Musk announced his intentions to acquire the social media service, a purchase that he believed would allow him to roll back Twitter’s moderation policies.

Twitter attempted to wrangle the world’s wealthiest man in recent weeks as he steadily snapped up its shares. Last week, Twitter offered Mr. Musk a board seatbut he soured on the arrangement when it became clear that he would no longer be able to freely criticize the company. He rejected the role on Saturday and informed Twitter on Wednesday evening of his acquisition plans.

Mr. Musk seemed to be girding for a protracted fight on Thursday. “Taking Twitter private at $54.20 should be up to shareholders, not the board,” he tweeted, alongside a Yes/No poll.

Still, it is not clear who, if anyone, will be on Mr. Musk’s side. His initial, bare-bones offer left open significant questions about his ability to cull together financing. Mr. Musk has hired Morgan Stanley to advise on the bid, although the investment bank is not typically known for financing large-scale deals on its own. And Twitter shareholders seemed wary: Twitter’s stock fell almost 2 percent on Thursday, closing at $45.08 — significantly below Mr. Musk’s offer.

Prince Al Waleed bin Talal of Saudi Arabia, who described himself as one of Twitter’s largest and most long-term shareholders, said on Thursday that Twitter should reject Mr. Musk’s offer because it was not high enough to reflect the company’s “intrinsic value.” Analysts also suggested that Mr. Musk’s price was too low and did not reflect Twitter’s recent performance.

Mr. Musk argued that taking Twitter private would allow more free speech to flow on the platform. “My strong intuitive sense is that having a public platform that is maximally trusted and broadly inclusive is extremely important to the future of civilization,” he said in an interview at the TED conference on Thursday.

He also insisted that the algorithm Twitter uses to rank its content, deciding what hundreds of millions of users see on the service every day, should be public for users to audit.

Mr. Musk’s concerns are shared by many executives at Twitter, who have also pressed for more transparency about its algorithms. The company has published internal research about bias in its algorithms and funded an effort to create an open, transparent standard for social media services.

But Twitter executives balked at Mr. Musk’s hardball tactics. After a Thursday morning board meeting, the company began exploring options to block Mr. Musk, including the poison pill and the possibility of courting another buyer.

During an all-hands meeting on Thursday afternoon, Twitter’s chief executive, Parag Agrawal, sought to reassure employees about the potential shake-up. Although he declined to share details about the board’s plans, he encouraged employees to stay focused and not allow themselves to be distracted by Mr. Musk.

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