Twitter adopts 'poison pill' to block Elon Musk takeover

(Image credit: Android Central)

What you need to know

• Twitter has enacted a "poison pill" measure to make it harder for shareholders to aquire additional stake in the company.
• The measure is in response to Elon Musk's bid to aquire the company, a move that has been deemed "unsolicited."
• The measure is meant to protect smaller shareholders while deterring takeover attempts.

Twitter announced on Friday that it is enacting a "shareholder rights plan" in order to block Elon Musk's "unsolicited, non-binding" bid to acquire the company.

The plan, also known as a "poison pill," would dilute Musk's stake in the company by allowing other shareholders to purchase additional shares at a lower price. The plan mandates that any individual investor's rights will be "exercised" if they purchase more than 15% of Twitter's common stock without board approval. Essentially, it makes a potential takeover much less desirable.

"The Rights 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," Twitter said in a statement on Friday.

While the new plan is an obvious measure to block Musk from taking over Twitter, the press release notes that the board is still able to accept acquisition proposals if they believe it's best for the company. However, that doesn't appear to be the case with Musk.

Earlier this month, Musk purchased nearly 10% of Twitter's stock, making him the largest sole shareholder. However, he refused to join the company's board, which notably would not have allowed him to own more than 14.9% of the company's stock. Then, in a surprising move, the Tesla CEO placed a bid on Thursday to purchase all of Twitter's common stock.

Immediately following his offer to buy the company, Musk explained in an interview that he wanted to buy Twitter to turn it into "an inclusive arena for free speech." He says he wants to make Twitter's moderation policies more transparent by making its algorithm open-source.

The poison pill may not deter Musk from purchasing Twitter — it would just make it more expensive to do so. However, Musk admitted that he's not sure if he'll be able to acquire the company, stating that he has a "Plan B" if he's unable to purchase Twitter.

Derrek is a long-time Nokia and LG fanboy who loves astronomy, videography, and sci-fi movies. When he's not working, he's most likely working out or smoldering at the camera.