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Ask HN: What happened to Twitter poison pill?

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Re: Ask HN: What happened to Twitter poison pill?

#131

Post by krick »

mabbo wrote: post #63

During a hostile takeover, someone buys 51% of the shares. They then elect a board of people who will approve whatever they want. Then they can do things like 'merge' the company with some other company they own at a board-approved value-per-share. That value will be much lower than what they paid per share when buying it on the open market, but not so low that the government gets involved. Eg: Musk buys the shares a…

1. How does that look for a random TWTR holder far away from SV? One day his broker just informs him that there are no longer securities on his account, but that account has received some cash?

2. Why is it even allowed (by the government) to decide the share price at the board meeting? These shares don't belong to them, somebody has purchased them already. And these people have decided what the shares are worth, that's kinda the definition of "market price". The board didn't decide that, market did. If they want to get these shares back it sounds only fair that they should have to pay what the new owners consider the fair price, whatever it is.

Re: Ask HN: What happened to Twitter poison pill?

#132

Post by potsandpans »

dogecoinbase wrote: post #127
qiskit wrote: post #114

Earlier quoted context omitted.

> The board negotiated a deal with Elon after putting the poison pill into effect. There was no "negotiation" with the board. Elon just made an unsolicited offer and said take it or leave it. The board "left it" and yet here we are. > If Elon had made a deal directly with the stockholders, that would have triggered the poison pill. What? That's not how poison pills work. Poison pills exist to prevent hostile takeover…

I know it's a big ask, but it would be kind of nice if HN added a flag context situation so one could flag a comment as "has literally no idea about how corporations work" rather than just a generic flag.

as someone with limited understanding of how corporations work, i had a hard time understanding who was factually correct in the exchange.

Re: Ask HN: What happened to Twitter poison pill?

#133

Post by 01100011 »

mabbo wrote: post #63

During a hostile takeover, someone buys 51% of the shares. They then elect a board of people who will approve whatever they want. Then they can do things like 'merge' the company with some other company they own at a board-approved value-per-share. That value will be much lower than what they paid per share when buying it on the open market, but not so low that the government gets involved. Eg: Musk buys the shares a…

> They then elect a board of people who will approve whatever they want.

As others have mentioned, Twitter has a staggered board, meaning not all board members are up for election at the same time. Replacing the board would take years in a hostile takeover.

Patrick Boyle did a great video on this which is slightly less relevant now that the board has accepted the offer but still is a reasonable intro to corporate governance:

https://youtu.be/QXxeyOVpnCU

Re: Ask HN: What happened to Twitter poison pill?

#134

Post by mylons »

krick wrote: post #131
mabbo wrote: post #63

During a hostile takeover, someone buys 51% of the shares. They then elect a board of people who will approve whatever they want. Then they can do things like 'merge' the company with some other company they own at a board-approved value-per-share. That value will be much lower than what they paid per share when buying it on the open market, but not so low that the government gets involved. Eg: Musk buys the shares a…

1. How does that look for a random TWTR holder far away from SV? One day his broker just informs him that there are no longer securities on his account, but that account has received some cash? 2. Why is it even allowed (by the government) to decide the share price at the board meeting? These shares don't belong to them, somebody has purchased them already. And these people have decided what the shares are worth, tha…

1: yes. you get cash for your shares. 2: the board is representative of the share holders, like your US Congress person. they have a fiduciary responsibility to give the share holders value. the only reasonable way they could blow up this deal is if twitter had an incredible roadmap with a very good path to matching the value or exceeding the value of Elon's offer. no such roadmap exists, apparently.

Re: Ask HN: What happened to Twitter poison pill?

#135

Post by ransom1538 »

krick wrote: post #131
mabbo wrote: post #63

During a hostile takeover, someone buys 51% of the shares. They then elect a board of people who will approve whatever they want. Then they can do things like 'merge' the company with some other company they own at a board-approved value-per-share. That value will be much lower than what they paid per share when buying it on the open market, but not so low that the government gets involved. Eg: Musk buys the shares a…

1. How does that look for a random TWTR holder far away from SV? One day his broker just informs him that there are no longer securities on his account, but that account has received some cash? 2. Why is it even allowed (by the government) to decide the share price at the board meeting? These shares don't belong to them, somebody has purchased them already. And these people have decided what the shares are worth, tha…

Pretty much. Your tdameritrade account will just update and stick cash into your account and explain what they did in the cost basis tab.

Re: Ask HN: What happened to Twitter poison pill?

#136

Post by [deleted] »

krick wrote: post #131
mabbo wrote: post #63

During a hostile takeover, someone buys 51% of the shares. They then elect a board of people who will approve whatever they want. Then they can do things like 'merge' the company with some other company they own at a board-approved value-per-share. That value will be much lower than what they paid per share when buying it on the open market, but not so low that the government gets involved. Eg: Musk buys the shares a…

1. How does that look for a random TWTR holder far away from SV? One day his broker just informs him that there are no longer securities on his account, but that account has received some cash? 2. Why is it even allowed (by the government) to decide the share price at the board meeting? These shares don't belong to them, somebody has purchased them already. And these people have decided what the shares are worth, tha…

[deleted]

Re: Ask HN: What happened to Twitter poison pill?

#137

Post by jmyeet »

mabbo wrote: post #63

During a hostile takeover, someone buys 51% of the shares. They then elect a board of people who will approve whatever they want. Then they can do things like 'merge' the company with some other company they own at a board-approved value-per-share. That value will be much lower than what they paid per share when buying it on the open market, but not so low that the government gets involved. Eg: Musk buys the shares a…

Sorry but this is utter nonsense.

51% of a company is not some magic ticket that allows you to do basically anything (including screwing the other 49%). It just doesn't work that way. There are certain thresholds that allow you to do more and more things but if you're in control of a company you still have a fiduciary duty to the other shareholders, even small minority shareholders. This is why minority shareholder lawsuits are a thing. This is what makes the entire corporation system work otherwise the 51% would be constantly screwing over the 49%.

Take your example: if you buy 51% of the shares for $50/share and then try and merge at an effective $25/share. Well, that's illegal because you've failed your fiduciary duty to the 49%. You're effectively trying to steal from them.

Also, you can't just acquire 51% of a company. There are rules about that too. There are thresholds here too. IIRC more than 5% and you have to inform the market of taking a large position. More than (IIRC) 10-20% and you have to launch a formal takeover offer. There are rules about how that works too.

Re: Ask HN: What happened to Twitter poison pill?

#138

Post by jmyeet »

The poison pill was a negotiating tactic to discourage Musk or at least get him to raise his offer.

What happened? Simple. Large shareholders are in favor of the sale.

The board here doesn't "sell" Twitter. All they do is recommend to the shareholders to accept the offer. I mean it's not quite as simple as that because there are rules about making formal takeover offers and boards can (and do) negotiate with potential buyers who may exact conditions like not seeking other offers and so on.

But ultimately this is up to the shareholders and the board is just reflecting the will of those shareholders to sell.

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