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Twitter board adopts poison pill after Musk’s $43B bid to buy company

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Re: Twitter board adopts poison pill after Musk’s $43B bid to buy company

#341

Post by friesfreeze »

JumpCrisscross wrote: post #329
friesfreeze wrote: post #320

Earlier quoted context omitted.

Under DE law, my understanding is that you are slightly off on this. Boards do have a duty to maximize shareholder value. THAT SAID, the business judgement rule provides that judges will not second guess the board absent evidence of gross negligence or total disregard of duty. This is because the Delaware court has decided that judges are not better than boards at evaluating business decisions. BUT! Overcoming the BJ…

> have a duty to maximize shareholder value Not to maximize profits. Courts give companies a wide berth in defining shareholder value.

Right, though I don't think it is so vague as to be meaningless. The stakeholder / shareholder value debates in corporate governance play on the extremities of this distinction a lot, with the current koan being that what is good for stakeholders is good for shareholders.

Re: Twitter board adopts poison pill after Musk’s $43B bid to buy company

#342

Post by JumpCrisscross »

aetherson wrote: post #134
paxys wrote: post #106

Earlier quoted context omitted.

Not everyone buys a stock for a quick short-term turnaround. If I expect Twitter to 20x in the next 5 years why would I want to sell my share to Elon? And existing investors all have the option to cash out today for just 17% less than Musk's final offer.

If you expect Twitter to 20x in the next 5 years, then a: You're dreaming. b: You're absolutely expecting a quick short-term gain.

> b: You're absolutely expecting a quick short-term gain

To put this in perspective, 20x in 5 years is an 82% CAGR. And five years is far short of the length of an economic cycle. Traditionally, "long term investing" meant across at least one whole business cycle.

Re: Twitter board adopts poison pill after Musk’s $43B bid to buy company

#343

Post by eqmvii »

the_svd_doctor wrote: post #337
codedokode wrote: post #333

I don't really understand how this "poison pill" is legal. Imagine that you own a stock that can be sold at free market at $10/share. Then the board decides that whoever buys those shares will have to resell them to board members at $1. This means that now the price of those shares drops to $1 and you have lost $9 per share. How this can be legal?

Same. If I own 10% of a company, how can the board just decide through some mechanism that I now really own like 8% ?

They can always do that, by just issuing more shares. In fact, if you buy X shares, the percentage of the company you own could well decline over time. Or increase, in the case of stock buybacks.

Re: Twitter board adopts poison pill after Musk’s $43B bid to buy company

#344

Post by the_svd_doctor »

bingohbangoh wrote: post #336
codedokode wrote: post #333

I don't really understand how this "poison pill" is legal. Imagine that you own a stock that can be sold at free market at $10/share. Then the board decides that whoever buys those shares will have to resell them to board members at $1. This means that now the price of those shares drops to $1 and you have lost $9 per share. How this can be legal?

Isn't it legal until somebody successfully sues for it to be nulled? The US legal system is kind of based around this adversarial situation imo.

Given that it's not a new mechanism and the amount of money involved, I assume if it wasn't legal this would have been sued into oblivion already.

Re: Twitter board adopts poison pill after Musk’s $43B bid to buy company

#345

Post by itsarnavb »

metadat wrote: post #240
politician wrote: post #202

Earlier quoted context omitted.

Twitter’s speech moderation policies should be public, and all decisions pertaining to speech should be public, and there should be a public appeals process before a jury of the speaker’s peers.

That's a lot to ask when each user account is free. You're basically replicating the US Courts Legal System, except those on trial pay 0% taxes. Not viable. Keep thinking though, we need a hero of an idea to make forward progress on the question of what strategy is best for US-based public companies, and what their role is in showing the world what the gold standard for "freedom of speech" online looks like.

I like this description of the problem and the suggestion:

> Today on Twitter, as on most social media, justice works in a roughly Stalinist style. The normal penalty is permanent execution. There is no transparent explanation for why an account is executed, before or after the execution. It has simply “violated the Twitter rules.” The public rules are extremely abstract and could theoretically justify almost any execution. The private rulebook by which the secret police, or “Ministry of Trust and Safety,” operates, is of course as secret as everything about the secret police.

> Of course, it is easy to observe that a two-day-old spam account does not deserve a six-month trial, with lawyers, before getting the bullet it needs in the back of the neck. Due process in this context must not be a clone of the IRL judicial system, which is more broken than anyone can possibly imagine.

> And there is a simple solution to the problem of scaling due process: *scale the level of due process to the size of the account*. An account with a million (real) followers might well deserve a six-week public trial, perhaps even with some kind of counsel. The spammer with 20 followers? Any cop can shoot him, as at present, and leave the body by the side of the road as a warning to others.

> There is a use for online Stalinist justice—it is only an injustice when it is disproportional to the user’s investment in the service. When Twitter is your career and any cop can just shoot you, an eerie atmosphere of terror pervades everything.

Source: https://graymirror.substack.com/p/the-twitter-coup

Re: Twitter board adopts poison pill after Musk’s $43B bid to buy company

#346

Post by Tyr42 »

codedokode wrote: post #333

I don't really understand how this "poison pill" is legal. Imagine that you own a stock that can be sold at free market at $10/share. Then the board decides that whoever buys those shares will have to resell them to board members at $1. This means that now the price of those shares drops to $1 and you have lost $9 per share. How this can be legal?

I think that's not how it works.

Imagine there are 1000 shares and Elon got 150 of them, bought at $50 so he owns 15%. If the board now sells 1000 new shares to people who aren't Elon, he now only owns 7.5%.

It's not that you resell to the board

Re: Twitter board adopts poison pill after Musk’s $43B bid to buy company

#347

Post by oconnor663 »

the_svd_doctor wrote: post #337
codedokode wrote: post #333

I don't really understand how this "poison pill" is legal. Imagine that you own a stock that can be sold at free market at $10/share. Then the board decides that whoever buys those shares will have to resell them to board members at $1. This means that now the price of those shares drops to $1 and you have lost $9 per share. How this can be legal?

Same. If I own 10% of a company, how can the board just decide through some mechanism that I now really own like 8% ?

Actually yes, this is often called "dilution", and it's common in companies that are raising money by selling stock. I'm sure there are complicated rules about when it's allowed and how much is allowed, but I don't know what they are.

Re: Twitter board adopts poison pill after Musk’s $43B bid to buy company

#348

Post by pfhayes »

codedokode wrote: post #333

I don't really understand how this "poison pill" is legal. Imagine that you own a stock that can be sold at free market at $10/share. Then the board decides that whoever buys those shares will have to resell them to board members at $1. This means that now the price of those shares drops to $1 and you have lost $9 per share. How this can be legal?

The board can issue new shares (equivalently, diluting existing shares) if it thinks it is in the interest of the shareholders. That’s clearly what they think of the poison pill, but it’s harder to argue that for the hypothetical you are describing

Re: Twitter board adopts poison pill after Musk’s $43B bid to buy company

#349

Post by perardi »

xyzzy21 wrote: post #19

And then the board and executive get sued for failing to maximize shareholder value. It's literally a violation of federal law.

Even if that was really a law, which it isn’t…

…what if they board believes they are maximizing shareholder value in the medium or long term? What if they sincerely believe Musk would be a fickle CEO, and would make changes to the platform that would harm ad growth?

Re: Twitter board adopts poison pill after Musk’s $43B bid to buy company

#350

Post by rgbrenner »

codedokode wrote: post #333

I don't really understand how this "poison pill" is legal. Imagine that you own a stock that can be sold at free market at $10/share. Then the board decides that whoever buys those shares will have to resell them to board members at $1. This means that now the price of those shares drops to $1 and you have lost $9 per share. How this can be legal?

That’s not the way it works. So of course it sounds illegal because you’ve made up an illegal scenario.

When the board triggers this clause, they may sell shares to existing shareholders at a discount. These are new shares. Companies have every right to sell shares outside of the exchange they’re listed on… and they do that all the time, through employee grants or options, for example.

When raising funds they generally sell new shares on the exchange, because that’s the highest price they can obtain for the share.. but they don’t have to do that.

And yes, in case you didn’t know, companies can sell as many shares as they want.

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