Twitter Responds to Elon Musk Proposal by Creating Poison Pill formally called a “limited duration shareholder rights plan,”

The social media and communication platform Twitter, responded to the bid by billionaire entrepreneur Elon Musk by announcing Friday the Twitter board of directors has unanimously adopted a “poison pill” defense in response to Tesla CEO Elon Musk’s proposal to buy the company and take it private. [LINK to Press Release]

Twitter said the move, formally called a “limited duration shareholder rights plan,” aims to enable its investors to “realize the full value of their investment” by reducing the likelihood that any one person can gain control of the company without either paying shareholders a premium or giving the board more time. Poison pills are often used to defend against hostile takeovers.

According to Twitter’s plan, if Musk or any other person or group acquires at least 15 percent of Twitter’s stock, the poison pill will trigger.

At that point, every other shareholder aside from Musk would be allowed to purchase new shares of Twitter at half the going market price, which stood at $45.08 at the closing bell on Thursday.

The flood of half-price shares would effectively dilute Musk’s ownership stake, making it massively more expensive for him to build up a controlling position. Twitter said its board had voted unanimously in favor of the plan, which will remain in effect until April 14, 2023.

Obviously, the people in control of Twitter really do not want to lose control over the platform. Elon Musk’s offer to purchase Twitter at $54.20 per share, represents a value of 38% more than the current evaluation. The public shareholders would make a sizeable return on their investment. However, the fiduciary responsibility of a board of directors to its shareholders is really not what this is about.


In the big picture Twitter is a bottomless pit of financial cost. Once you understand the technology behind Twitter, it is easy to understand why the public speech platform is not a viable business model, and it never was.

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