New Delhi: In a bid to counter Elon Musk's takeover of Twitter, board of contradicting microblogging website unanimously adopted 'poison pill' or investor rights set Friday, Reportable News Organization AFP.
The rights established by the board may inherit the impact if a buyer acquires a fifteen percent or more interest in the outstanding shares of Twitter in a deal not approved by the board.
"The rights configuration may reduce the likelihood that any entity, person or group will gain control of Twitter through open market accumulation without paying all shareholders an acceptable management premium," Twitter said in a statement.
The world's richest person and Tesla and SpaceX CEO Elon Musk on Thursday announced an unsought partner offer to amass Twitter, stating that promoting free speech on the social media platform is his "best and last offer". He went a step further by giving $54.20 per share, making the social media platform's valuation around $43 billion, in a same filing with the Securities and Exchange Commission that was made public on Thursday. To get more tech updates, business updates, Taaja samachar Aaj Ka , news breaking etc. Visit our blogs.
Last week, Musk disclosed his 9.2 percent shareholding in Twitter, even though he turned down a seat on the company's board.
What is a 'poison pill'?
Established shareholder rights, informally called "poison pill", could be a defensive move adopted by World Health Organization companies becoming targets of hostile takeovers where existing shareholders of the target, except the acquirer, buy more shares of the company at reduced costs to make it less attractive to the receiving entity.
As the name suggests, poison pills represent a hard call to swallow by the board of directors of the target company, as they make the company less attractive, by buying shares at a reduced price, it suggests the dilution of ownership of the company. Have you read about What is Citizen Journalism Pros and Cons?
However, it becomes vital for a company to adopt such a way of life in order to safeguard the rights of minority shareholders and furthermore avoid changing the management of the company's management.
There are generally two types of poison pills: flip-in and flip-over poison pills. Once shareholders, except the acquirer, buy more shares at a discount it could be a flip-in porcupine arrangement. Whereas, once a company's shareholders buy shares of the receiving company, once an acquisition becomes a winner, thus diluting the acquirer's ownership, it could be an inverted porcupine provisioning strategy.
The poison pill also increases the price of the acquisition, which discourages the acquiring company from seizing, although management also generally uses it to their advantage to urge a better valuation.
Examples of "Poison Pill" In past
The online video streaming platform, Netflix, had in 2012 proclaimed an investor rights facility, poison pill , just days after venture capitalist Carl Icahn took a non-hereditary 10% stake in the company. . the company had announced the purchase of two shares for the value of one in the event that someone acquired a ten percent or more stake in the company.
The father of the American Fast food chain, John's, had also invoked the 'poison pill' in 2018 against its ousted founder, John Schnatter, the World Health Organization closely controlled 30% of the company's shares, for the acquisition of the company.
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