Hostile Takeover – Twitter Uses “Poison Pill” To Defend Itself From Elon Musk

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Elon Musk, the richest person in the world, wants to buy Twitter – but it is questionable whether his takeover attack will succeed. Tesla’s boss is dependent on enough shareholders to give him their shares at the bid price of $54.20. Twitter fought back on Friday.

The countermeasure means that other shareholders can buy additional shares cheaply if a buyer rises above 15 percent. The move is a classic “poison pill” where companies threatened by takeovers take refuge. The plan should last for a year, Twitter’s board of directors said. An exception would be if a deal is approved by the board of directors.

The stock market does not believe in Musk’s success: the price usually rises in the direction of the bid for takeover plans – but on Thursday the Twitter share fell by 1.5 percent to $ 45.18. On Friday, it moved further to the $45 mark.

Doubts about takeover
Musk himself admitted his doubts. “I’m not sure I’ll actually be able to buy it,” he said on Thursday. However, the 50-year-old emphasized that he “technically” had the necessary funds to complete the deal of more than 40 billion dollars (37 billion euros). In recent weeks, he already bought a 9.2 percent stake in Twitter.

Musk is by far the richest person in the world. His net worth is estimated at $251 billion (€232 billion) by the financial service Bloomberg, based on the latest stock prices. The net worth mainly consists of interests in the electric car manufacturer Tesla and the aerospace company SpaceX. To buy Twitter, he would either have to sell stock or take out loans with the property as collateral.

Saudi Prince Rejects Musk
But even if Musk can raise the necessary funds, shareholder approval is the big hurdle. In addition to the free float, Twitter has several financial investors as major shareholders, each holding between two and eight percent of the shares. So it would not be enough to convince just a few large shareholders to sell. A major shareholder, Saudi Prince Alwaleed bin Talal, has already publicly rejected Musk.

At the same time, Twitter isn’t as well protected from hostile takeovers as Facebook, Amazon, or Google, where founders were given more voting shares. This allows them to retain control of the company even if they no longer own the majority of the shares. Musk scolded: In the metagroup, for example, this ensures that “Mark Zuckerberg the 14th” still retains control over Facebook, WhatsApp and Instagram.

threat or not
Musk wrote that the price was his last bid. If the attempt fails, he will have to reconsider his commitment to Twitter. “It’s not a threat, it’s just not a good investment without the changes that need to be made.” Threat or not – this can at least be seen as a fairly transparent reminder to shareholders that the price could fall again very soon.

Criticism of Musk’s understanding of free speech
As the reason for his interest in Twitter, Musk states that he wants to strengthen freedom of expression on the platform. This is only possible if the SMS service leaves the stock exchange, he says. Musk outlined his idea of ​​free speech this way: “When someone you don’t like can say what you don’t like.” All opinions should be allowed within the limits of the law.

This attitude has been criticized by experts such as former Facebook security chief Alex Stamos. You’re not adding value to a platform by filling it 99.9 percent with pornography and ads for fake sunglasses and ED drugs.

In recent years, conservatives in the United States, and especially supporters of former President Donald Trump, have accused Twitter and other online platforms such as Facebook of “censorship.” Most of these dealt with measures against the spread of false information about the coronavirus and Trump’s false claims that his victory in the 2020 presidential election was stolen.

Away from advertising, to subscriptions
Trump has since been banned from Twitter. Management has so far stressed that there is no going back to the platform for the ex-president. Musk’s approach could leave Trump now and notice ahead of another run in the 2024 presidential election: He thinks temporary “timeouts” are better than permanent lockouts, the Tesla chief generally said. In its early days, Musk downplayed the dangers of the virus itself and criticized restrictions in California as “fascist”.

The Tesla boss has more than 80 million followers on Twitter. In a tweet, Musk hinted that he would like to replace Twitter’s current business model, which has ads as its main source of revenue, with subscription revenue. Relying on ad revenue gives big companies too much power.

Source: Krone

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