How long can Twitter's shareholders stomach its poison pill in the face of Musk's offer? This article looks at the alternatives for the social media behemoth.
Nothing beats the innovative strategies devised by a firm undergoing hostile takeover when it comes to the art of defence. Twitter’s recent poison pill strategy should serve as a clear indication that Tesla CEO Elon Musk is in for a long battle with the board. Nonetheless, several analysts believe that, despite taking the poison pill, the firm’s only option now is to find a friendly investor or a white knight to save it from Musk’s advances. According to certain reports, they feel that Musk is Twitter’s white knight and that time for private equity firms to show interest in the social media giant has gone long past, even before the pandemic.
Earlier last week, following Musk’s $43 billion takeover offer, Twitter shareholders regrouped to implement a poison pill strategy to fortify the company. This meant that existing shareholders used the poison pill strategy to prevent the buyout offer from being accepted. In bid to crown himself king of data, Musk’s planned offer has been mainly due to his speech to acquire a firm that is public platform that is maximally trusted and broadly inclusive, perhaps in his vision to make Twitter great again. Perhaps, Musk aims to capture revenue from countries using the platform such as the US and India.
The largest corporate drama in history appears to be unfolding as corporate boards compete to protect the company from the one of the world’s richest men, who is worth around $280 billion-plus. According to reports, he has already received close to $46.5 billion to fund the deal, and the shareholders are looking for a “white knight” bidder to come to their aid.
Twitter has no shortage of bidders interested in taking the company private, but it’s worth noting that many of them are staying away. Companies such as Google, Amazon, Microsoft, Apple, and Facebook may consider competing bids, but this is unlikely due to the increased scrutiny of big tech in the country’s antitrust surveillance. Well-known bidders in the private equity space, such as Blackstone, have all stayed away.
Existing shareholders have bitten the poison pill as a shareholder’s rights plan that will be triggered if Musk or any other shareholder expands their stake in Twitter to approximately 15% without a significant approval from the board. Yet this plan, expires in a year, as it imposes a significant penalty, based on reports, on any potential investor, looking to increase their stake, protecting the shareholders from any coercive or unfair tactics from potential bidders.
Many speculate that Musk’s entry into the fray is the result of a lacklustre innovation, growing technical shortcomings, and possible leadership infighting. Many believe that it is past time for Twitter to go private, but there are doubts about Musk’s suitability.
It was reported over the years that the $48 billion-plus market cap firm drew significant scrutiny from activist investor Elliott Management, who felt that founder Jack Dorsey was too indecisive. Dorsey, for his part, has received considerable criticism from a variety of sources as his company hasn’t capitalised on opportunities such as videos, ratings, and reviews, or news which seem to be innovative strategies being tapped on by rival tech firms.
According to a recent Financial Times report, Thoma Bravo, a firm with over $100 billion in assets, has begun discussions with Musk. According to previous reports, Apollo has shared a bid. It remains to be seen who will gain control of one of the most iconic social media giant in internet history.