Twitter’s board of directors has reportedly decided on a limited duration shareholder rights plan following Elon Musk’s proposal to buy the company.
Musk, 50, has made headlines since last week after disclosing a 9.2% stake in the social media giant and becoming its largest shareholder. Shortly after, reports revealed that Vanguard Group had taken over the Tesla chief with a 10.3% stake as of April 8.
Still, Musk remains Twitter’s largest individual shareholder. On Thursday, the billionaire caused a media blitz after announcing his plan to purchase the company for $43 billion, a move perceived by some critics as a “hostile takeover.” Some Twitter employees had reportedly been in panic since Musk refused to join the company’s board of directors, which led to speculations of a looming buyout. Had he accepted the invitation, he would be required to cap his stake at a maximum of 14.9%.
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“Musk’s immediate chilling effect was something that bothered me significantly,” AI research team director Rumman Chowdhury wrote in a tweet. “Twitter has a beautiful culture of hilarious constructive criticism, and I saw that go silent because of his minions attacking employees.” In the wake of Musk’s proposal, Twitter Chief Executive Officer Parag Agrawal assured employees that the board would follow a “rigorous process” and make a decision “in the best interest of our shareholders.” On Friday, the board unanimously adopted the limited duration shareholder rights plan, which essentially serves as a “poison pill.”
Under the so-called “Rights Plan,” shareholders will be able to exercise their rights if an entity, person or group acquires ownership of at least 15% of the company’s outstanding common stock in a transaction not approved by the board. By then, shareholders can purchase additional shares at a discounted rate.
The board said the plan will “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.” It also allows them to engage with other entities, including those with acquisition proposals.
Amid various allegations, Musk maintains that his actions were not motivated by money, but by his belief in free speech.
“I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy,” Musk wrote to Board Chairman Bret Taylor. “However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company.”
“Twitter has extraordinary potential. I will unlock it.”
The Rights Plan is set to expire on April 14, 2023. Musk said he has a Plan B if his proposal was shut down.