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Twitter's board said they had unanimously adopted a "poison pill" defense in response to Elon Musk's bid for a hostile takeover. He has made an offer to buy the social media platform for more than $43 billion.
Social media giant Twitter said on Friday that its board of directors has unanimously adopted a "poison pill" defense as a response to Tesla CEO Elon Musk's proposal to buy the company for more than $43 billion.
Musk, who is an avid user of the platform, has made an offer to purchase 100% of its stock and take it private. He was supposed to become a board member of the company but Twitter CEO Parag Agrawal said earlier this week that "Elon has decided not to join our board."
Musk has previously called Twitter the world's "de facto town square."
Earlier this month, Musk became the social media platform's biggest shareholder — owning 9.5% of shares — after spending $2.9 billion.
The position on Twitter's board would have limited him to owning no more than 14.9% of the company and would have obliged him to act only in the company's best interests.
Musk had rallied for support on the platform and thanked people for backing him in a poll where 73% of people said he should buy Twitter.
The "poison pill" move would allow existing Twitter shareholders, except for Musk, to buy additional shares at a lower rate, thereby diluting his stake in the company.
This would make it harder for him to corral a majority of shareholder votes in favor of the acquisition. The plan would take effect if Musk's stake grows to 15% or more.
The plan will reduce the chances of any one person gaining control of the company without either paying shareholders or giving the board more time to evaluate offers.
Such plans are made to prevent hostile takeovers of any corporation, and protect shareholders' rights.
Musk still has the option of taking over the company by waging a "proxy fight," in which shareholders vote to retain or dismiss the current board of directors.
The "poison pill" plan does not prevent the board from negotiating or accepting an acquisition proposal, if it is considered in the company's best interests.
Analyst Dan Ives told the AFP news agency that the board's move would "not be viewed positively by shareholders" given both the potential dilution of stock and the signal it sends of hostility towards being bought. He foresaw a "likely" court challenge.
Musk revealed in recent regulatory filings that he had been buying Twitter shares in almost daily batches starting January 31.
The Tesla co-founder and CEO has already acknowledged he was "not sure" he would succeed in taking over Twitter, and noted a rejection would make him consider selling his existing shares.
Some Twitter investors have spoken out against the proposal, including businessman and Saudi Prince Alwaleed bin Talal.
tg/jsi (AFP, AP, Reuters)