Elon Musk’s Tesla is about to go public, creating the most valuable automaker in history. But first, investors who’ve grown wary of Musk will be meeting their first resistance. What makes this battle so unique? And what are its implications for future takeovers and securities laws?
The “poison pill defense” is a strategy that companies use to protect themselves from hostile takeovers. It consists of a series of actions that the company takes, which can be seen as an attempt to make it more difficult for the target company’s shareholders to vote in favor of the takeover.
The one that is starting to resemble an entrepreneurial thriller, or Musk’s effort to take over Twitter. In the past few hours, has accelerated even further, with the first counter-reactions and new stances adopted by the well-known entrepreneur.
In the last few hours, billionaire and entrepreneur Elon Musk, CEO of a slew of high-tech firms (Tesla, Space X, Neuralink, The Boring Company, and others), has proposed to purchase 100% of Twitter’s shares at a price per share that includes a bonus, in the name of the greatest possible offer. The initial reactions to this occurrence were swift, and Musk, needless to say, did not sit on the sidelines.
On Thursday, Twitter CEO Parag Agrawal, who took over the social media after the obligatory resignation of co-founder Jack Dorsey, held a Q&A meeting (questions and answers) with the platform’s employees , to answer their doubts and concerns. When asked by one of the employees about the possible coincidence of the concept of freedom of expression intended by Musk with that pursued by the social network, Agrawal on the one hand replied that “Twitter represents much more than a human being, any human being” and, in the during the meeting, he added that many of the efforts made by the platform are (already) aimed at ensuring the “health of the conversation”.
After recognizing that it is early to discuss the subject of layoffs if the firm goes private, he noted that the board of directors is going through a “rigorous process” to evaluate Musk’s proposal.
Musk promptly replied to this media-reported comment by conducting a poll on his Twitter profile, stating that the privatization of the social network “should be a choice of the shareholders, not the board of directors,” and receiving positive response on the topic. However, at this time, one of the platform’s single greatest owners, Saudi prince Alwaleed bin Talal, has rejected Musk’s proposal on behalf of his Kingdom Holding Company fund, claiming that it does not represent the true worth of the social network, given its inherent growth possibilities.
Needless to say, this comment elicited a response from Musk. On the one hand, the latter asked on Twitter how many shares of the platform the prince’s fund owned, both indirectly and directly, and then asked what the prince’s concept of freedom of expression was, before explaining at the TED 2022 conference in Vancouver that it was not attempting to storm Twitter for money and that the social media in question should be open-source (with its code that should be uploaded to GitHub so that people can analyze it). Finally, on the same occasion, the flamboyant entrepreneur stated that he is no longer certain he would be able to purchase 100% of Twitter and that, in any case, he still has a “plan B” in case he fails.
Elon Musk has met his first resistance to his hostile takeover. The “flip-over poison pill” is a strategy that prevents the company from being taken over by a hostile party.
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