The poison pill. This is going be super interesting to watch play out. Pretty much eliminates the hostile takeover from being feasible unless they want to bury many more billions to get it done. But Twitter is going to get their butts sued left and right for breaching fiduciary duty to stockholders.
Yes that's what a hostile take-over is and twitter just adopted a poison pill:
> reduce the likelihood that any entity, person or group gains control of Twitter through open market accumulation without paying all shareholders an appropriate control premium or without providing the Board sufficient time to make informed judgments and take actions that are in the best interests of shareholders.
Courts have upheld poison pills that treat 13D and 13G filers differently. I'd wager most ETFs that hold 5% of major public companies are 13G filers. Vanguard files a 13G for twitter. To be fair idk what the twitter pill will do - maybe it will be more aggressive.
Every company I know of that did a poison pill to prevent a takeover wound up tanking within a year or two and the shareholders wound up with sand.
As a Twitter shareholder myself, the board is making a big mistake.
As a legal matter, I don't understand how a board could sell shares to other shareholders at a lower price than to the entity wanting to buy shares to gain control.
They will talk to Twitter board and make an agreement with them to not trigger the poison pill, and continue buying shares.
Such an agreement would be reached incredibly quickly, there would be no need for stopgap measures.
From the article:
> Under the new structure, if any person or group acquires beneficial ownership of at least 15% of Twitter’s outstanding common stock without the board’s approval
>Twitter will be flooded with thousands of shareholder lawsuits (for breaching their fiduciary duty)
It's hard to say that Twitter breached their fiduciary duty when both their representing bank (Goldman) and the second largest shareholder (Kingdom Holding Company) both rejected the offer. The lawsuit will likely go nowhere; the sentiment is that the offer is way too low.
Maybe you don’t remember the 80s but this is how pretty much every hostile takeover went down. Leveraged buyout > massive layoffs and restructuring > change in business model and the next thing we’ll likely see is some form of selling off assets or divisions, not sure what those would be in Twitter’s case but it won’t be a surprise if they come up with something.
There have been targeted FUD campaigns aimed exclusively at Twitter employees for weeks now, trending on social media and even traditional media. Threats of mass layoffs is one, but another I've seen is this idea that somehow employees will be cheated out of their equity. But this is simply not plausible. For all intents and purposes (except possibly minutiae debated in a courtroom or the IRS), any equity vested as cash immediately upon the acquisition being closed.
From my understanding, the board has no (direct) say in this. He's asking the shareholders - i.e. anyone who owns Twitter stock - to sell to him for that price until he has the required majority. All the board can do is put up measures to make this hard (like the poison pill thing).
No matter what Twitter does, they face legal issues. They are stuck between a rock and a hard place.
If they accept the deal at the proposed price, then the board will definitely get sued by the ones who bought TWTR at a higher valuation.
If they refuse the deal, then the board will definitely get sued by people who bought TWTR at a lower valuation.
No matter what they'll do, there's going to be _someone_ who's going to sue them.
CEO has more responsibilities than just fiduciary duty, and as well it could easily be argued that a deal for $1 b in Facebook stock would be much better than $1.5 b in Twitter stock because of the general uncertainties of the market when dealing with private companies rather than companies that have undergone the fiscal requirements outlined for public companies. tl;dr: Facebook is stock is liquid, Twitter is not.
Unless there are some serious smoking guns here this case is going nowhere fast, Twitter doesn't really have standing in a fiduciary duty case as they are not a shareholder. Since the vast majority of shareholders have not complained it's a pretty easy argument that the vast majority of shareholders are happy with the performance of Instagram.
To nail Instagram they'll have to prove an anti-trust violation, and/or fraud/perjury. Given the underwriters for Facebook this is highly unlikely.
If the banks seize Twitter, do they really have to own and operate it? They only need to be able to flip it for at least the value of the $13B liability it collateralized, plus whatever associated legal and tax costs. Twitter is probably not worth $44B anymore but supposing they can seize it before its users and assets and brand have all gone to zero, I imagine that there is someone somewhere who is willing to gamble $13B for the opportunity to own Twitter, pick up the pieces and try to restore their credibility and value prop, and try to take it public with at least a $20B valuation so they can cash out at a nice profit.
Is Twitter going to spend the next few years litigating this just to force someone to buy the company that doesn't want to? Elon's team can drag this on and on.
What will happen to the value of Twitter's stock in the meantime? What will happen to the value of working at Twitter? It'll become a zombie company.
Kind of depends on the terms of the deal, namely whether it's an asset deal as opposed to a stock deal. In the latter Twitter would assume liability for contracts. In the former they just acquire IP and hire away the employees.
Acquirers usually prefer asset deals for this reason as it allows them to leave unpleasant liabilities behind. There's generally some sort of shell left that goes through wind down but it has few/no assets attached. In this case you can try to go after the original investors including founders or other shareholders (the IRS may do this if there tax issues) but since there's nobody home you are less likely to get much out of a favorable judgement.
a) The poison pill only affects those who are looking to control the company in some way. Which isn't most large investors at all. So I doubt you will find any who will be concerned by this.
b) Twitter's stock price is now $45, peaked at $77 only last year and is profitable. Not sure where you get this ridiculous idea the company is unsellable.
c) There are plenty of free speech competitors to Twitter. None are even remotely successful. Because as Reddit also showed far more people want a moderated experience more than those that don't. And Twitter is a business first and foremost.
d) Musk is offering shareholders a premium as the stock is today. But as I mentioned even just last year it was significantly higher. And so I can't imagine shareholders would have an issue about them turning it down if they believed Twitter was still continuing to head in the right direction as it is now.
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