Twitter Inc. has adopted a limited duration shareholder rights plan, often called a “poison pill,” a day after billionaire Elon Musk offered to buy the company for $43 billion.
- Twitter is trying to thwart Elon Musk’s takeover attempt with this strategy. ‘Poison pill’ is a financial device that companies have been wielding against unwelcome suitors for decades.
What is ‘Poison pill’ strategy ?
- The ‘Poison pill’ strategy was popularised back in the 1980s when publicly held companies were being stalked by corporate raiders such as Carl Icahn – now more frequently described as “activist investors.”
- Under the new structure, if any person or group acquires beneficial ownership of at least 15 per cent of Twitter’s outstanding common stock without the board’s approval, other shareholders will be allowed to purchase additional shares at a discount.
- Such a move is a common way to fend off a potential hostile takeover by diluting the stake of the entity eying the takeover.
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