Despite the long weekend for public markets, the news surrounding Twitter (NYSE:TWTR) ceased to slow down. Twitter’s board unanimously voted to enact a limited duration shareholder rights plan, or a poison pill plan. The board introduced the poison pill to deter a potential hostile takeover. Additionally, the plan will expire on April 14, 2023. However, the board can still accept an acquisition offer if it believes it is in the best interest of the company and shareholders. The plan was introduced after Elon Musk made a $43 billion unsolicited bid to take the social media platform private. Musk currently owns a 9.1% stake.
With that in mind, let’s take a look to see what the poison pill plan means for TWTR stock.
TWTR Stock: Board Introduces Poison Pill
The poison pill plan will be triggered if any entity acquires 15% or more of all Twitter shares outstanding without the board’s approval. If that happens, the plan would give other shareholders of Twitter — but not the entity that acquired a 15% stake — the right to purchase shares at a discounted value. When this happens, shares of the company become diluted. As a result, the entity with a 15% stake would have lesser control over the company.
Twitter’s board has made it clear they are not interested in Musk’s offer with the introduction of the poison pill. However, Musk may still have a few tricks up his sleeve.
Elon Musk’s Rumored Plan B For Twitter
Over the weekend, Musk tweeted out “Love Me Tender.” Before that, the Tesla (NASDAQ:TSLA) CEO also stated that he had a Plan B if his unsolicited bid were to fall through. Now, investors are speculating that Musk’s Plan B is a tender offer.
A tender offer is an offer made to shareholders to acquire their shares at a specified price within a “particular window of time.” The tender offer price is usually set above the current market price in order to attract shareholders to sell their shares. An individual or group can offer shareholders a tender offer without the approval of the board.
Investopedia states that a target company’s shares usually trade below the tender offer price soon after the announcement. This is because there is still uncertainty surrounding the offer. As the closing date of Musk’s offer nears, the price should more accurately reflect the possibility of a successful tender offer.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
