[Summary] Final Ultimatum for Acquisition... Twitter Considers "Poison Pill," Musk Mentions "Plan B"

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Seulgina Jo] "What is the real intention?" "Are you seriously thinking about acquiring it?"

These were the questions raised at an emergency meeting held on the afternoon of the 14th (local time) for all employees of Twitter, which received a hostile merger and acquisition (M&A) proposal from Elon Musk, CEO of Tesla and the world's richest person. Musk CEO's sudden move has turned not only the industry but also the capital market upside down.

Amid speculation that Twitter may introduce a 'poison pill' to defend its management rights as early as the 15th, Musk CEO, who appeared in an official setting amid controversy, revealed that he has a 'Plan B' if Twitter rejects his acquisition proposal.

◆Will Twitter introduce a poison pill?

Local media including Bloomberg reported that Twitter's board of directors is considering measures to defend management rights against hostile M&A and may announce them as early as the 15th.

The primary option under discussion is the poison pill. This system, previously adopted by Netflix to fend off corporate raider Carl Icahn, grants existing shareholders call options to purchase new shares at a price much lower than the market price in advance. Even if the M&A party buys shares, it becomes difficult to aim for management rights due to the significantly increased number of shares. However, it has the downside of lowering the stock value and could provoke Musk CEO, who has strong financial power, so it is not an easily chosen card.

During the Twitter employee meeting that day, questions were raised about whether M&A with other companies or poison pills were being considered. In response, Parag Agrawal, Twitter CEO, said, "It is against the law to disclose specific progress," and "The board is thoroughly reviewing Musk's proposal and will make decisions that are in the best interest of Twitter shareholders." He also mentioned that one person, Musk CEO, cannot change Tesla's corporate culture and said, "We are not held hostage by the acquisition proposal."

Currently, the market expects Twitter to use the poison pill as a weapon to negotiate further with Musk CEO while also seeking a white knight. Vanguard, which has returned as Twitter's largest shareholder (10.3%), major shareholders Morgan Stanley (8%), and BlackRock (4.6%) have not yet expressed their stance on Musk CEO's acquisition proposal. Saudi Arabia's Prince Alwaleed bin Talal, estimated to hold about 4% of shares, officially opposed, stating, "I believe that proposal falls short of Twitter's intrinsic value."

An insider mentioned, "Another option under consideration (besides the poison pill) is that the purchase offer price is too low." Previously, Musk CEO proposed $54.20 per share as "the best I can offer," which is a 38% premium based on the price before the investment news was announced. However, considering that Twitter's stock price was in the $70 range a year ago, it is by no means a high amount.

◆What is Musk's Plan B?

Musk CEO, who dropped the bombshell, attended the TED event held in Vancouver, Canada, and said about the possibility of acquiring Twitter, "I'm not sure," but added, "I have enough wealth, and if possible, I can (acquire it)." When asked if he has a Plan B if Twitter rejects his proposal, he said, "Yes."

The market speculates various possibilities for Musk CEO's Plan B, ranging from aggressive tender offers to giving up the acquisition. Wedbush Securities analyst Daniel Ives predicted, "This drama will end with Musk CEO owning Twitter through aggressive and hostile M&A," and "Twitter's board will eventually accept Musk's proposal or proceed with the company's sale process."

He might even give up the acquisition and create a new platform like former President Donald Trump. Some voices also question the sincerity of his acquisition proposal. Gene Munster of Loup Ventures said, "If Musk CEO aimed to acquire Twitter, he would have already secured shares and completed the acquisition," and evaluated, "What he wants is freedom of expression within Twitter, which is insufficient as a motive for acquisition."

The Wall Street Journal (WSJ) pointed out, "Musk's attempt to acquire Twitter looks like a long shot gamble," adding, "Shareholders do not support it, and the board is preparing barricades. Despite his vast wealth, it is questionable whether he can raise cash."

Contrary to Musk CEO's assertion that "They will like my proposal," Twitter and Tesla's stock prices fell by 1.68% and 3.66%, respectively, compared to the previous session on the New York Stock Exchange that day. Victoria Skaler, head of investment at Interactive Investor, said the market is weighing the possibility of the acquisition falling through. Rich Greenfield, analyst at research firm LightShed Partners, mentioned, "Some parts of the acquisition proposal make it seem like this is all a joke and that he is just having fun."

This content was produced with the assistance of AI translation services.