[HN Gopher] Ask HN: What happened to Twitter poison pill?
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Ask HN: What happened to Twitter poison pill?
Last week it was said that Twitter's directors will take a poison
pill instead of selling Twitter to Elon Musk. What caused the
board to change the direction 180 and now closing the deal with
Musk? Can anyone shed a light on that, I didn't see anyone talking
about this.
Author : rukshn
Score : 130 points
Date : 2022-04-25 17:22 UTC (5 hours ago)
| ttyp3 wrote:
| I don't have to know, to know: $$$.
| soneca wrote:
| Poison pill can be used for price negotiation, not just blocking
| an offer. Prevent hostile takeover and force the buyer into the
| negotiation table. They are now in the negotiation table.
|
| The rumor is that the offer to be accepted is the same, so it
| wouldn't have worked as intended, but that doesn't mean it wasn't
| worth trying.
| lesam wrote:
| Not quite the same - pre-pill, Musk did not have funding lined
| up. Post pill, he produced written documents about how he was
| going to fund the buyout, and had to promise to buy all the
| shares, not just the first 51%.
| xyzzy21 wrote:
| The legality of a poison pill is defined by case law of of Unocal
| vs. Mesa Petroleum.
|
| https://en.wikipedia.org/wiki/Unocal_Corp._v._Mesa_Petroleum....
|
| Basically a company can ONLY create a poison pill IF and ONLY IF:
|
| * the tactics of the party doing the hostile takeover are
| "coercive"
|
| * the hostile takeover will likely result in dissolution of the
| company
|
| Neither applies to Twitter in any serious sense. Musk's methods
| are anything but coercive under the law per point #1. A change in
| direction or operations is NOT legally the same as point #2.
|
| Additionaly, board members are required under law to maximize
| shareholder value under the rubrik of profit maximization (eBay
| vs. Newmark) and public company board members can be PERSONALLY
| legally liable for lost profits and punitive damages.
|
| https://www.lexisnexis.com/community/casebrief/p/casebrief-e...
|
| It's VERY LIKELY that the Twitter board was informed of these
| cases (again, hopefully - these are legal fundamentals of being
| on a corporate board you'd be stupid not to know ahead of time).
|
| As a result the Twitter board appears to have "straightened up
| and are flying right" in terms of law and potential legal
| liability now.
|
| Again: I'm utterly mystified that boards (especially in "Tech")
| do not seem to know basic stuff like this and let companies run
| riot in ways that puts both the board and executives at
| tremendous personal legal and financial risk.
| colinmhayes wrote:
| I'm gonna go ahead and say this comment is misleading. The
| board is obligated to make decisions that they believe in good
| faith will maximize shareholder value. If they can come up with
| a reasonable explanation for why twitter is worth more than
| 54.20 (like it being worth 70 last year) they can go ahead and
| decline the offer.
| tptacek wrote:
| Notably, from one of that post's own links:
|
| _A board can use the protection of a rights plan to respond
| to an underpriced bid, counter the tender offeror 's timing
| and informational advantages, and force the hostile acquirer
| to negotiate with the board._
| tptacek wrote:
| Nobody knows yet why the board relented, but the scuttlebutt
| seems to be that Twitter arranged an internal valuation once Musk
| put a price on the company, presumably as justification for an
| internal plan that they'd announce as their alternative to
| acquisition, and the valuation actually showed Musk was
| overpaying for the income Twitter was likely to generate.
|
| (If the board hadn't relented, Musk's next step would have been
| to arrange for a tender offer, which goes directly to the
| shareholders, but _does not_ involved Musk acquiring new shares,
| but rather just a _commitment_ to buy those shares if the board
| drops the poison pill. Successfully getting that commitment would
| be a very strong signal to the board, which would likely then
| drop the shareholder rights plan and allow the acquisition to
| proceed. But Twitter 's board skipped those steps.)
| adenozine wrote:
| For a startup-oriented discussion place, it's shocking how little
| users know about how mergers/acquisitions/takeovers actually
| occur in the market.
|
| Don't they teach this stuff anymore? I had to learn this in
| college, many years ago.
|
| Of course, it was a little less likely for eccentric billionaires
| to just "shop" in the market like this for ultra-large
| corporations. Still. We at least knew how the processes worked.
| jacquesm wrote:
| You'd be surprised how many people active in the M&A market
| don't know. For instance, I regularly get glazed over eyes when
| I ask parties to sign a letter of non-reliance.
| darth_aardvark wrote:
| > I had to learn this in college, many years ago.
|
| I majored in Computer Science and Physics. Which of these
| disciplines would mergers and acquisitions have been in? Should
| my algorithms class taught us about diluted stock and RSUs vs
| ISOs? Does my quantum mechanics professor have a unit on
| hostile takeovers?
| st_goliath wrote:
| I guess that'd be astrophysics: Two large piles of money
| circling each other, causing distant ripples on the stock
| market.
| kasey_junk wrote:
| Hostile takeovers were much more common in the past as well.
| jenaimarre wrote:
| We all have different backgrounds and different interests, you
| know.
|
| Maybe you can share your knowledge, so those of us who are not
| dealing with mergers/acquisitions/takeovers can learn
| something?
| spiffytech wrote:
| I took a microeconomics course and a macroeconomics course in
| college. Mergers/acquisitions may have been mentioned briefly,
| but they weren't a point of study. Microeconomics focused on
| why individual entities make decisions, and macroeconomics
| covered stuff like why we have currency, why is inflation
| useful and how the Fed manages it, etc.
|
| In my decade on HN I've seen a lot about funding, IPOs, and
| acquisitions of private companies, but very little about
| hostile takeover of public companies.
|
| Where are you expecting people to have developed an incidental
| background knowledge on deploying / overcoming poison pills?
| qiskit wrote:
| > What caused the board to change the direction 180 and now
| closing the deal with Musk?
|
| Enough of the large shareholders behind the scenes backed the
| deal for whatever reason. Who, what and why? We'll never get the
| real story. Not in any newspaper, blog or whatever. I'm sure
| we'll get some fanciful stories, but that's all it'll be.
| Fanciful stories.
|
| The board of directors aren't the ones that have the final say.
| It's the major shareholders. Usually, the major shareholders back
| the board of directors because they are the ones who elect/hire
| the board of directors. Somehow, Elon and his backers convinced
| enough of the big boys to back him instead of the board of
| directors. Simple as that. Maybe he offered them free a roadster,
| starlink setup or a seat on a future spacex mission to mars. Who
| knows. But elon outmaneuvered the board of directors somehow.
| mabbo wrote:
| During a hostile takeover, someone buys 51% of the shares. They
| then elect a board of people who will approve whatever they want.
|
| Then they can do things like 'merge' the company with some other
| company they own at a board-approved value-per-share. That value
| will be much lower than what they paid per share when buying it
| on the open market, but not so low that the government gets
| involved. Eg: Musk buys the shares at $50/share, and then
| 'merges' the company at $25/share, effectively forcing 49% of the
| shares to be sold at half price. Those shareholders get screwed
| because they didn't sell their shares during the initial
| takeover.
|
| Edit: Or, just run the company however they want and share the
| profits with the other 49%, but ignore their votes, etc.
|
| The Poison Pill says "If a hostile takeover starts, we'll create
| and sell new shares at a reduced price to existing shareholders-
| other than the attacker- to prevent the 51% scenario". This is
| done not to prevent any takeover, but in the interest of the 49%
| of holdouts who would have been screwed over. It's an effective
| block against the takeover.
|
| The board represents ALL the shareholders, after all. They don't
| want to see anyone get screwed.
|
| But now Musk has made a deal that the board has approved. All
| shareholders get a specific price that is approved. The board
| wants this to happen, so there's no poison pill.
| hammock wrote:
| Your reply merely clarifies that this sale is not a hostile
| takeover. It doesn't seem to answer the question, "What caused
| the board to change the direction 180 and now closing the deal
| with Musk?"
| archon wrote:
| I just wanted to thank you for this. This is the most succinct
| and easy-to-understand-for-non-investors explanation of the
| concept I've seen and now I think I finally understand it.
| colonwqbang wrote:
| > The board represents ALL the shareholders, after all.
|
| This is the part I don't get. The person who bought 51% of
| shares is also a shareholder. How come the board can
| discriminate against a single owner like this, just taking away
| their shares by force. Could they do it to any existing owner
| if they wanted?
| jdasdf wrote:
| They are not discriminating. Elon can purchase the same
| amount of stocks (proportionally) at the same price as every
| other shareholder.
|
| It's just that since the strike price is lower than the price
| he is offering to buy the company at, other investors are
| better off exercising their warrants and then selling to
| elon.
| xyzzy21 wrote:
| If those who already own stock in the 49% sell, then someone
| else can buy up to 49% even if the 51% holder never sells.
|
| The amount of ownership can change for one already owning 51%
| if the amount of stock issued changes - that changes the
| denominator
|
| Finally: there is proxy voting. Normally common stock holders
| have 1 vote per share. However most votes are "proxy voted"
| where you give your vote to someone else because "reasons" -
| like you can't attend but an institutional investor seems to
| represent your position so you proxy to that investor.
|
| Via proxy voting, it's possible to push past 51% as a
| minority shareholder.
|
| Related to this, you can create an informal alliance with an
| institutional investor owning a larger share in the same
| company. This appears to be how Musk "borrowed" the money for
| his takeover - the money came from a large institutional
| investor that makes money on both ends: interest paid on the
| loan plus the promise of higher returns on Twitter stock.
| That's what's called a "can't lose investment" that no
| ideology can beat.
|
| Of course, the Twitter board famously owns no significant
| amount of stock which is problematic but reality - this means
| they have ZERO skin in the game so are more likely to shirk
| (or risk to shirk) their legal obligations for fiduciary
| responsibilities. They apparently got a legal wake up call
| over the weekend about this however.
| egeozcan wrote:
| As I understand, this happens before anyone acquires 51
| percent.
| majkinetor wrote:
| Is it possible to acquire up to 51% in atomic move, so
| there is no fade in that would make poisoning option too
| late ?
| mrkstu wrote:
| This is the kind of thing the 15% disclosure rule is
| designed to prevent.
| tptacek wrote:
| No.
| rcoc wrote:
| It would require a number of transactions as there is no
| single other shareholder that owns 51% in this case. So
| you can do a large number of transactions in a short
| window, which would cause the price to skyrocket.
| Additionally, there are disclosure requirements in place
| once a single shareholder reaches 5%+ ownership. Once the
| word gets out, everyone else starts buying.
| jollybean wrote:
| The poison pill is to make it so that the person can't ever
| get 51% because it's not good for everyone else.
|
| The 'short answer' to the question of 'why no poison pill' is
| simply because the Board reached some kind of agreement with
| Musk.
|
| I like Musk when he's in his lane, I don't see any good
| coming from this.
|
| Everyone is nuts to talk about 'shareholders' - who cares? As
| a 'consumer' - I want a good service and cheap (i.e. free)
| with no ads. I have zero interest in 'shareholders' of a
| company I'm not a shareholder in, other than legal
| protections.
|
| Caring about 'shareholder value' while not a shareholder, is
| like caring about some rich guys bank account - when often
| it's a zero sum game.
|
| Every dollar in an investors pocket should be a dollar on
| your pocket in term of reduced price etc..
|
| So aside from some things he may be able to do t bring the
| share price up ... I'm wary that much at all will actually
| benefit Twitter, and he could ruin it.
|
| I don't personally care about it, but it's an important media
| tool - it's how a lot of information gets out.
| emeraldd wrote:
| They aren't taking away anything, they would be diluting the
| 51% shareholder's shares. They're giving themselves the
| option to fend off a hostile take over by making the pool
| bigger so that no one can get to 51% ownership.
| colonwqbang wrote:
| Sure, I accept that it's legal in the US. It just seems
| strange that there isn't some rule saying that the board
| has to treat shareholders more or less equally. Since the
| board is elected by the shareholder votes it seems weird
| that they can just redistribute voting power at will.
|
| What if there was some minority shareholder that the other
| owners disliked for some reason, could they force them out
| too? Or this power is restricted to particular
| circumstances?
| jdasdf wrote:
| They are treating them equally. Elon has just as much of
| a right to purchase those shares at the same price as any
| other shareholder.
| SilasX wrote:
| >It just seems strange that there isn't some rule saying
| that the board has to treat shareholders more or less
| equally.
|
| AIUI, there is such a rule, and, FWIW, that's why I found
| the OP's explanation[1] somewhat dubious. Deliberately
| sabotaging the corporation for the benefit of another one
| that the 51%er owns ... seems like the kind of thing that
| the courts would strike down.
|
| [1] https://news.ycombinator.com/item?id=31160874
| tptacek wrote:
| Poison pills have been settled law in the US for decades.
| tptacek wrote:
| Shareholders are discriminated against all the time;
| companies have "preferred" and "common" shareholders.
| Meanwhile: nobody is _actually_ discriminated against,
| because it 's economically irrational to buy more than the
| shareholder rights plan trigger; from some light reading, it
| looks like no poison pill has ever been triggered (the whole
| point of the poison pill plan is to prevent that from
| happening).
| jmaygarden wrote:
| As far as I know, the only instance of a poison pill being
| triggered was Versata Enterprises, Inc. in December 2008.
|
| TL;DR: A competitor (Selectica, Inc.)--wishing to purchase
| Versata--bought over 5% of the shares. The IRS considers
| this an ownership change, and it imposes a penalty to
| discourage trading of Net Operating Loss (NOL) carryovers.
| A poison pill was in place to prevent this tax issue. The
| board executed the poison pill to dilute Selectica
| ownership from 6.4% to 3.9%, and that action held up
| through appeal to the Delaware Supreme Court.
|
| https://www.lw.com/upload/pubcontent/_pdf/pub2563_1.pdf
| Vladimof wrote:
| Twitter's board didn't know what it meant...
| joecot wrote:
| The Poison Pill plan was from the Board, to stop Musk from
| following through with a hostile takeover. But Elon reportedly
| convinced numerous large shareholders of his plan[1]. Even if the
| Board isn't a fan of it, the Board of a publicly traded company
| is ultimately beholden to their shareholders, so if the
| shareholders are convinced, they need to consider it.
|
| 1. https://www.reuters.com/business/exclusive-twitter-under-
| sha...
| JumpCrisscross wrote:
| Matt Levine:
|
| The poison pill left "Musk two main options. One is to negotiate
| with Twitter's board and try to strike a friendly deal. This
| might be hard because the board probably wants more money than
| Musk is willing to pay, and also because there seem to be
| strategic and personal disagreements between Musk and the board
| that might make friendly negotiations difficult. 'I am not
| playing the back-and-forth game,' Musk said in his initial
| proposal; 'I have moved straight to the end.' That's an annoying
| way to start negotiations.
|
| His other option is to pressure the board into dropping the pill,
| and the classic way to do that is with a tender offer plus a
| proxy fight, as we discussed yesterday:
|
| 1. Musk can launch a tender offer to buy all of Twitter's stock
| for $54.20 in cash. (Or, of course, some higher number.) The
| tender offer is a public, binding document filed with the SEC,
| open to all shareholders, and it will be full of disclosures
| about his plans and, in particular, his financing. Shareholders
| will be able to read it and see if he has the money. If it looks
| like he does, then they will be able to decide if $54.20 is a
| good enough price. If they think it is, they will be able to
| tender into his offer, submitting their shares for purchase. He
| won't be able to buy them, though, because of the poison pill;
| the tender offer will be contingent on getting rid of the pill.
| But if like 90% of shareholders tender into his offer, then that
| is an important public-relations victory; he can go to the board
| and say "your shareholders want this deal, let them take it." And
| then the board might agree and get rid of the pill, and then the
| tender offer can close and he can buy the shares.
|
| 2. Meanwhile, he can also try to get shareholders to vote their
| shares in a way that gets rid of the pill. Classically, the way
| to do this is to run a proxy fight to kick out the existing
| directors and replace them with Musk's chosen directors, who
| would get rid of the pill and let him close his deal. Musk can't
| really do that here, because of Twitter's corporate structure,
| but he can run some sort of informal symbolic proxy fight where
| he urges Twitter's shareholders to vote against the directors who
| are up for election in May, or where he urges them to vote to
| declassify Twitter's board so it's easier to kick the directors
| out in the future. If 90% of shareholders vote with him for these
| things, that's another sign to the board that the shareholders
| want his deal and should be allowed to take it.
|
| These things do not work automatically; even if 90% of
| shareholders tendered into Musk's offer and voted with him at the
| annual meeting, the board could still tell him to buzz off. It
| could easily do that if it found another bidder willing to pay a
| higher price, but it could also legally do that even without a
| higher bid; the law tends to defer to the board's business
| judgment about whether or not to accept a merger offer. But most
| of the time directors care about what their shareholders think,
| and if all the shareholders want Musk's $54.20 then it's
| embarrassing for the board not to give it to them." [1]
|
| TL; DR The poison pill forces Musk to negotiate with the Board.
|
| [1]
| https://www.bloomberg.com/opinion/articles/2022-04-20/elon-c...
| wskinner wrote:
| Matt Levine has been talking about this in most of his recent
| newsletters. Today's includes a play by play overview of the
| recent moves by Musk and the board along with explanation of why
| these steps happen the way they do:
| https://www.bloomberg.com/opinion/articles/2022-04-25/elon-c...
| fancyfredbot wrote:
| What changed is that Elon Musk secured funding, making his offer
| much more credible and forcing the board to reconsider. The
| poison pill is still there for now but the board can remove it as
| easily as they added it.
| gzer0 wrote:
| What caused the board to change course was that Elon Musk filed
| with the SEC showcasing that he actually has $46 billion in
| funding secured, via an amended 13D filing [1].
|
| This led Twitter's board to take his offer more seriously and
| many shareholders to ask the company not to let the opportunity
| for a deal slip away [2].
|
| [1]
| https://www.sec.gov/Archives/edgar/data/1418091/000110465922...
|
| [2] https://www.reuters.com/technology/exclusive-twitter-set-
| acc...
| NovemberWhiskey wrote:
| I mean, you have to respect Elon's consistency, if not the
| substance - "funding secured" filing to the SEC on 04/20 for an
| offer at $54.20.
| NovemberWhiskey wrote:
| It's amazing. You have to think that $54.20 is a number that
| Musk insisted on just for a prank. Do we seriously believe
| that the deal wouldn't have been done at a round $54? If you
| think it could, that's Musk overspending by >$150M in order
| to make a pot joke.
| AnimalMuppet wrote:
| I have a very cynical take on this. Assume that the board members
| are acting for the board members, no one else.
|
| If Elon buys Twitter, what happens to the board? Well, he can
| fire them all. They may prefer to remain board members, with the
| money and power that comes from that. So the poison pill, while
| it may be offered in the name of "protecting" the existing
| shareholders, is really a way for the existing board to remain in
| power.
|
| But that won't work if the offer is good enough that the existing
| shareholders want to take it. Then the poison pill becomes
| something the shareholders don't like, because it prevented them
| from doing what they want. Depending on how badly the existing
| shareholders wanted the offer, the board may not remain in power
| that way either.
|
| Note well: There may be details in the way all this went down
| that don't fit in my cynical little narrative. But absent
| knowledge of those details, this is my suspicion of what's really
| driving the poison pill.
| ipaddr wrote:
| https://investor.twitterinc.com/corporate-governance/board-o...
|
| The board includes karaoke maker, computer professor and a
| salesforce co coo. You might be on to something, I doubt many
| characters will find themselves on such a high profile board in
| the future.
| [deleted]
| dtagames wrote:
| Having zero knowledge of it, I would say that, since a poison
| pill is merely an _option_ for existing shareholders to buy more
| shares, if they don 't get enough takers for that option, then
| there's no news to print and no offer to compete with Elon's.
| MrBuddyCasino wrote:
| David Sacks' take on this (thread):
|
| ,,Things that must be true if Twitter's board is ready to accept
| @elonmusk's offer:
|
| 1) they did a soft market check and there were no other bidders.
|
| 2) @Jack is on board.
|
| 3) the pressure campaign worked." (cont.)
|
| https://twitter.com/davidsacks/status/1518623080557342720?s=...
| colechristensen wrote:
| The poison pill was intended to prevent a takeover without the
| board's approval (buying 51% on the open market)
|
| The board is negotiating an approved takeover which is entirely
| different
|
| I.e. the board was saying "you can only buy Twitter if we say so"
|
| There was no reversal of intentions
| qiskit wrote:
| This is simply wrong. The board outright rejected musk's offer
| and instituted a poison pill to prevent a hostile takeover of
| twitter by musk. So elon simply bypassed the board of directors
| and went to the major shareholders. It is the major
| shareholders who has final say, not the board of directors.
| Elon convinced enough of the major shareholders to accept his
| deal and once that happened, the board of directors has no real
| say. They have to do what the major shareholders say since the
| major shareholders are the ones who hire and fire the board of
| directors.
|
| > I.e. the board was saying "you can only buy Twitter if we say
| so"
|
| The board say "you can't buy twitter". So elon just talked to
| the board's bosses ( major shareholders ) and the board's
| bosses said "elon can buy twitter".
| [deleted]
| jszymborski wrote:
| Does anyone know if the terms were made more favourable to
| Twitter since the adoption of the Poison Pill?
| csa wrote:
| According to Matt Levine's column today, the poison pill may
| have just been a tactical move to guarantee time for
| negotiations while preventing the possibility of a hostile
| takeover (a potential BATNA for Musk).
|
| This seems to be what happened.
| thaumasiotes wrote:
| The price is the same. Matt Levine's coverage so far has
| implied that the effect of the poison pill was to force Musk
| to be more concrete and less hypothetical, which happened.
| delecti wrote:
| I think that, as far as the public is aware, there weren't
| terms prior to the adoption of the poison pill. Musk bought a
| bunch of shares, and was looking to buy more. The poison pill
| was the board preemptively saying "we see what you're doing,
| and you have to go through us to accomplish it".
| warning26 wrote:
| The key change was that funding is now secured; the initial
| bid was _contingent_ on securing funding.
| incomingpain wrote:
| The poison pill says elon cant buy more but current shareholders
| can buy more at a discount relative to the stock market.
| Basically Elon was just going to shell out slightly more money or
| fail and everyone who didn't buy is screwed.
|
| It however takes shareholders to want to buy more. Twitter is
| quite undefended. Poison pill was never going to be effective in
| any major way. At most they were going to delay the inevitable
| here.
|
| The media coverage of the poison pill was pretty bad, this was
| not going to be effective at stopping anything. The bigger news
| is why is Twitter so undefended. It makes sense from Jack
| Dorsey's pov, he was backing off. However even a saudi prince
| incorrectly believed he still owned twitter stock. It's super
| unusual for a S&P500 company to be so undefended.
|
| Yet worse, something that I have never seen happen, there are a
| ton of S&P500 companies that are undefended. This isn't true in
| other country indexes. What made the US stock market so
| offensive? I checked all my US holdings and somehow each of them
| are healthy with the only exception being Tyson. The stock market
| is going to blow up?
|
| DOW is down -7% YTD. S&P500 is down -11% YTD. With inflation at
| 8.5%, those are down alot.
| formerkrogemp wrote:
| What do you mean "undefended?" A drop-in stock price?
| flutas wrote:
| > However even a saudi prince incorrectly believed he still
| owned twitter stock.
|
| Wait, did I miss something on this? Last I had seen he still
| owned the stock but rejected Musk's offer.
| logifail wrote:
| > Last I had seen he still owned the stock but rejected
| Musk's offer.
|
| Musk did ask him a) how much stock the Kingdom owned, and b)
| their views on freedom of speech[0]
|
| I didn't see a reply :)
|
| [0] https://twitter.com/elonmusk/status/1514683079968931841
| JaimeThompson wrote:
| Musk doesn't care what the Kingdom does, he is just
| trolling.
| incomingpain wrote:
| https://twitter.com/Kaitain_US/status/1514645842463891463/ph.
| ..
|
| https://twitter.com/zerohedge/status/1514747126210863108
|
| He sold his shares in 2018.
|
| What do you think made him sell in 2018 but still think he
| owned stock?
| nell wrote:
| If they did the poison pill they have to show strong results to
| prove that the company is more valuable than the offer and that
| they are better shepherds of the company. If Twitter announced
| weak results in the upcoming earnings call in these market
| conditions, their stock would fall hard. If his bid were to be
| rejected, Elon would sell his 9% stake which would be another
| blow. The current board can't survive this. They will be sued for
| not performing their fiduciary duty.
| uf00lme wrote:
| Like everything in finance, simply talking or threatening
| something is enough to make it real. The actual pill or action is
| rarely ever wanted or needed, it's like the meta verse of
| bluffing.
| bin_bash wrote:
| The poison pill would only take effect if someone purchased >15%
| of shares on the _open_ market--going around the board. Elon made
| an offer to the board directly which they can accept without
| triggering the poison pill.
| afavour wrote:
| My read on it is that the shareholders didn't want Musk
| controlling the company (owning 51%) and dragging them along with
| him. Being the absurdly rich person he is, he'd likely not care
| too much about how service changes would affect the stock price.
|
| However they _are_ quite happy to let Musk buy all of them out
| (owning 100%) at a reasonable price then let him do whatever
| marketshare-tanking moves he wishes. They don't actually care
| about the fate of the company, they just don't want to lose
| money.
| bpodgursky wrote:
| The board actually held a pretty minimal % of the company, I
| would not read anything into the average shareholder's view
| from the board's position.
|
| Elon's next move was a tender offer which put the issue in
| front of shareholders for an up/down vote on a full buyout,
| which would sidestep any board poison pil.
| vimy wrote:
| But owning 100 % was Musk's offer all along.
| [deleted]
| paxys wrote:
| There was nothing stopping him from increasing his share
| while the board was deliberating. He could have used that
| tactic to increase pressure. The poison pill clause meant
| that the board was free to take whatever decision they wanted
| in the timeframe they deemed fit.
| taubek wrote:
| Yes, this has also confused me. What is so different now than
| 10 days ago?
| lumost wrote:
| Musk could have screwed the other shareholders by buying
| 51% and leaving it at that.
|
| Hostile takeovers haven't been common for a while, and so
| twitter was unprepared when one started.
| johnobrien1010 wrote:
| Good analysis from Matt Levine for those who are interest
| ed:https://www.bloomberg.com/opinion/authors/ARbTQlRLRjE/
| matthe...
| barelysapient wrote:
| Musk's offer 10 days ago didn't have financing secured.
| Today's offer does.
| nwsm wrote:
| Nothing is different. This is not a hostile takeover
| stouset wrote:
| ... any more.
| KingMachiavelli wrote:
| Leaving the option of gaining control via 51% hostile
| takeover would essentially be a ~50% discount for Elon. If
| your goal is to sell at the highest price you don't want to
| count on someones word or intentions.
|
| Plus even if Elon really wants all 100% for _reasons_ , the
| bank providing funding would certainly want him to consider
| any cheaper options since it's (nearly) the same gain for
| them but less risk to finance buying 51% vs 100%.
| paulpauper wrote:
| Nothing is ever set in stone. He had the money and $43 billion is
| too enticing to pass up given that the stock has done nothing
| since the IPO.
| techdragon wrote:
| Critically, the price didn't even shift that much given his
| takeover offer... which is just nuts. If someone offers to buy
| all the stock and it doesn't shift up to at least close to the
| offering price, then something is wrong with either public
| perception of the company or the entire stock market.
|
| It eventually drifted up, but you see other companies where a
| hostile takeover offer is cause to halt trading due to how fast
| the price spikes.... Which did not happen for Twitter. Twitter
| is not a "blue chip" stock which people expect stability from,
| perhaps even a _gasp_ dividend... but nope, it's a tech stock
| with none of that... yet is weirdly stable. That's screams
| "complacency" to me and complacency is fertile ground for
| business, either by outside forces via hostile takeover and new
| management or a new disruption from a new market entrance.
| Given the network effect pressure it's obvious that hostile
| takeover looks, at least from a "running the business"
| perspective, to be an obvious move.
|
| Like many business decisions it just looks to me like "who will
| gamble on a bet this big"... and these days it's individual
| billionaires who can afford to make bets like this. It's a
| second golden age of capitalism, and I'm looking forward to the
| next Great Depression and the much needed cultural rest wth
| respect to assholes with too much money.
| JumpCrisscross wrote:
| > _If someone offers to buy all the stock and it doesn't
| shift up to at least close to the offering price, then
| something is wrong with either public perception of the
| company or the entire stock market_
|
| There were doubts about the bid. Musk had no financing. Now
| he has financing. The market has moved.
|
| If he'd come back last week with a "tee hee jk" tweet about
| buying Twitter, everyone would have taken it in stride and
| then mocked those who bought the rumour to get run over by
| the news.
| tyrfing wrote:
| > If someone offers to buy all the stock and it doesn't shift
| up to at least close to the offering price, then something is
| wrong with either public perception of the company or the
| entire stock market.
|
| No, it's a reflection of uncertainty over whether it will
| happen. Present value is not the offer price, since it's not
| guaranteed, and also accounts for the time for the deal to
| close - $54 in a year isn't worth $54 today. Regulatory risk
| isn't a big deal here, but is elsewhere, like ATVI trading at
| a significant discount to MSFT's offer.
|
| TWTR is up significantly today since there's a binding deal
| now.
| gscott wrote:
| They might not want to end up like Yahoo where there was an
| offer not accepted then the stock just went down and down
| from there. With the near certain recession coming the board
| would be on the hot seat hoping that the stock price would
| eventually go back up while Elon would be nagging them from
| the sidelines the entire time.
| TrispusAttucks wrote:
| I assumed that the board did't want to end up in court for
| breaching their fiduciary duty [1]. But that could just be spin.
|
| [1] https://twitter.com/elonmusk/status/1514718700674306052
| abfan1127 wrote:
| can someone explain why you'd spend $210/share rather than just
| buy on the open market at ~$50/share now? Are the $210 shares
| better in some way? Why would the $210 price double?
| ada1981 wrote:
| Who is buying shares at $210?
| ceejayoz wrote:
| It's a bit confusing; it's not $210 a share, but that was the
| exercise price for the poison pill bonus shares.
|
| https://twitter.com/matt_levine/status/1516047634812833799
| abfan1127 wrote:
| so if they buy it at $210, but can sell it at $420? who
| buys it at $420? Twitter?
| ceejayoz wrote:
| They would've had the right to purchase $420 worth of
| stock for $210.
|
| Functionally, a stock split for everyone but Musk. Hence,
| poison pill.
| basisword wrote:
| >> What caused the board to change the direction 180 and now
| closing the deal with Musk?
|
| He secured financing for the deal.
| pclmulqdq wrote:
| "Funding secured"
|
| They also probably wanted to buy time for a counter-offer to
| show up at a higher price.
| HWR_14 wrote:
| The poison pill is the name of a corporate strategy that prevents
| Elon from just buying 50% of the shares in the stock market and
| doing whatever he wants. It doesn't mean the same thing as the
| board saying they would rather swallow poison than deal with
| Musk.
|
| Therefore, the board engaging with his bid to buy twitter, and
| the two of them only negotiating that way, was the goal. So it's
| not a 180.
|
| The board was originally hesitant to engage because even Elon
| Musk could have a lot of trouble raising $44 billion in cash.
| They didn't want to agree to a deal that didn't go through (like
| trying to buy a house without cash or preapproval). He seems to
| have secured loans to actually pay for Twitter, so now they are
| seriously engaging.
| xiphias2 wrote:
| I think it was more than just they didn't believe Elon had
| trouble raising the cash. They liked being in control of
| Twitter and getting easy money as board members, and didn't
| realise that they can get personally liable for billions of
| dollars of loss for shareholders and go to court for years if
| they don't at least consider the offer and seriously evaluate
| whether the offer is worth taking for Twitter shareholders or
| not.
| peterbonney wrote:
| > didn't realise that they can get personally liable for
| billions of dollars of loss for shareholders and go to court
| for years if they don't at least consider the offer
|
| It is ludicrous to believe that, even if this were true
| BEFORE the Musk bid came in, they were not consulting with
| corporate counsel AFTER and in conjunction with issuing the
| poison pill.
|
| As others have said, it is frequently used as a negotiating
| tactic and will usually pop up somewhere along the way in any
| unsolicited takeover situation. Just like the simple act of
| saying "no" is often a negotiating tactic and not a true
| statement of someone's unwavering intent.
| axg11 wrote:
| The poison pill provision and Elon's takeover are not mutually
| exclusive. It's in the board's best interest to gain maximum
| leverage over Elon. A poison pill puts the board in a better
| negotiating position in discussions with Elon allowing them to
| get better terms. Once terms are agreed they are free to repeal
| the poison pill.
| verdverm wrote:
| Elon submitted his final terms, there won't be negotiations,
| based on current public statements. As noted by others, the
| poison pill is not even in actual effect.
| emmp wrote:
| Well, 1) He publicly claimed it was his final terms, but
| there is no reason a board should not at least try to use any
| leverage they have to try to interrogate that claim.
|
| 2) The valuation is not the only thing the board and Musk
| need to agree to. There are break up terms, ability to accept
| a higher offer if one materializes, liability in case of
| funding breakdowns, antitrust assurances, etc etc. So again,
| any leverage is useful.
| UmYeahNo wrote:
| My understanding was that the poison pill would not kick in until
| someone owned 15% of the common shares[0]. Musk owns less than
| that, so the poison pill has not activated. However, Musk claims
| to have funding for an offer such that he did not need to buy the
| shares to reach 15%, instead he just said, I want to buy them all
| -- everything for $46.5B.
|
| [0] https://www.cnbc.com/2022/04/15/twitter-board-adopts-
| poison-...
| esotericimpl wrote:
| The poison pill can be used by the board of directors in case of
| a "hostile" takeover of the company.
|
| In the case of a non "hostile" takeover, meaning the board
| approves the takeover price there is no poison pill to be used.
| eurasiantiger wrote:
| The idea of the "poison pill" is to make it possible for board
| members to strenghten their ownership by issuing new shares to
| existing owners with a discount in the event that one single
| outside entity buys a significant portion of the shares.
|
| It is artificial dilution, which in practice makes it possible
| for the board to cause heavy short-term losses to anyone
| attempting a hostile takeover: the market reaction to dilution is
| predictably a lowering of the going price of the stock unless the
| news comes with significant and credible hype about future
| profits.
|
| The risk of this happening is what is thought to stave off the
| takeover.
| shadowgovt wrote:
| In essence.
|
| The thing to keep in mind in all of this is none of this was
| _ever_ about what 's best for the users (current ownership vs.
| new ownership). It was always about whether the existing owners
| would get screwed in the takeover. User welfare barely enters
| into the story.
|
| This is France and Germany hammering out the details of who
| owns Alsace-Lorraine; Twitter users themselves are just Alsace-
| Lorraine peasant-farmers.
| anamax wrote:
| > make it possible for board members to strengthen their
| ownership by issuing new shares to existing owners
|
| This poison pill does not strengthen Twitter board members'
| ownership because they don't own much Twitter stock.
| phendrenad2 wrote:
| Seems like it's a standard practice, and the news just
| overhyped the whole thing.
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