Twitter Says No To Musk By Taking The Poison Pill As Its Annual Meeting Looms

• Published date: 19 May 2022
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law, Directors and Officers, Shareholders
• Law Firm: Dykema
• Author: Ryan S. Alexander

Fielding questions from many interested persons within the past few days (no one affiliated with Twitter or Musk in any way) served as inspiration to provide a brief synopsis of Elon Musk's offer to purchase all of the Common Stock of Twitter, Inc., a Delaware corporation, Twitter's latest response of implementing its poison pill (a/k/a an anti-takeover device) and Twitter's recent history relating to these headlines.

As most have seen, on April 13, 2022, Musk delivered a non-binding proposal to the board of directors of Twitter to acquire 100 percent of Twitter's Common Stock at price of $54.20 per share. In his offer, Musk announced his intentions to delist Twitter from the New York Stock Exchange and take Twitter private with limited shareholders for the purpose of taking Twitter to the next level. In response on April 15, 2022, by and through its 8-K filing, Twitter announced its implementation of a limited duration shareholder rights plan (the poison pill) that Twitter had prepared for such occasion as disclosed in its last 10-K filing.

In its 8-K filing, Twitter stated that its board adopted the poison pill plan "to protect stockholders from coercive or otherwise unfair takeover tactics" with the overall effect of making Musk's pursuit of Twitter "more difficult." In a press release also issued on April 15, 2022, Twitter advised that the poison pill is "intended to enable all shareholders to realize the full value of their investment in Twitter" and to "reduce the likelihood that anyone gains control over Twitter without paying all shareholders an appropriate control premium" or providing Twitter's board "sufficient time to make informed judgments and take actions that are in the best interests of shareholders." Both the poison pill and Twitter's public statements concerning its adoption are standard fare and common practice for publicly-traded companies in similar circumstances.

Twitter's poison pill plan, formally known as the Preferred Stock Rights Agreement, is a common poison pill plan having two features. It includes a "flip-in" feature allowing all of Twitter's shareholders (except Musk) to purchase shares of Twitter's Common Stock at a would-be 50 percent discount of its projected market price upon Musk's accumulation of 15 percent of Twitter's outstanding Common Stock which is intended to make Musk's efforts economically unviable if he moves forward without the consent of Twitter's board. Upon Musk's accumulation of 15 percent of the Common...