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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?

#171

Post by MacsHeadroom »

krick wrote: post #155
mylons wrote: post #134

Earlier quoted context omitted.

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.

2. That doesn't answer my question. Actually, I'm not even sure how it attempted to. I specifically mentioned the "market price". I don't really know how these US congress persons work, and you may as well imply that the idea that they "represent" you is as much bullshit, as Musk-assigned board member represent real shareholders (and I have no problem with this implication), but there surely must be difference (and i…

>If anybody makes them sell at any price that's less than what they want — it's a robbery.

No, this incorrect. Pending a shareholder vote, the board of a company can force you to accept an amount they determine to revoke the validity of your shares. If the value per share (which they decide) of a specific class of shares is not so low as to illicit concern from regulators then it's all above board.

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

#172

Post by twayt »

quickthrower2 wrote: post #163
jmyeet wrote: post #146

Earlier quoted context omitted.

What "name-calling" would that be exactly?

I see "Sorry but this is utter nonsense" as ad hominem, a put down, with overtones of a dismissive "wiser" person dismissing out of hand what is said. That effect of this psychological slight outweighs the fact that they did back up their argument afterwards and didn't leave it as just an unsubstantial comment. Kind of like a microagression: https://en.wikipedia.org/wiki/Microaggression , I think... Human language an…

No calling an argument "utter nonsense" doesn't imply anything about the person making the argument. You may think it is ad hominem but technically it simply isn't since it isn't directed to a person but rather their argument.

However, in this context, calling their argument "utter nonsense" is utterly unnecessary and only serves to up the ante.

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

#173

Post by adoxyz »

krick wrote: post #155
mylons wrote: post #134

Earlier quoted context omitted.

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.

2. That doesn't answer my question. Actually, I'm not even sure how it attempted to. I specifically mentioned the "market price". I don't really know how these US congress persons work, and you may as well imply that the idea that they "represent" you is as much bullshit, as Musk-assigned board member represent real shareholders (and I have no problem with this implication), but there surely must be difference (and i…

The board of directors has a fiduciary duty to represent the shareholders. That also includes the minority shareholders in your scenario. I think the comment above was just making a general statement of what could happen and in that hypothetical scenario, or even if you make it more extreme, say Elon and co acquire 51% of twitter for $50, and install new board with their majority and then the board decides to go private, selling the full company to Elon for $0.01 per share. Could they do this? Technically, I would say yes. But in reality, they would be sued by the 49% of shareholders and the SEC would probably launch an investigation (which is what OP meant by govt would get involved). On the open market, the board doesn't really have much control over the price, but when it comes to complete buy-outs or mergers, they can set a price and as long as most of the shareholders are happy, it is what it is. I'm sure with this Twitter buyout at $54.20, some people are holding shares that they bought at $60+ last year, and they'll be forced to liquidate those and get the payout, so they won't be too happy, but considering the current price of twitter and it's road map it may be a good price.

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

#174

Post by nullc »

colonwqbang wrote: post #78
emeraldd wrote: post #72

Earlier quoted context omitted.

They aren't taking away anything, they would be diluting the 51% shareholder's shares. They're giving themselves the option to fend off a hostile take over by making the pool bigger so that no one can get to 51% ownership.

Sure, I accept that it's legal in the US. It just seems strange that there isn't some rule saying that the board has to treat shareholders more or less equally. Since the board is elected by the shareholder votes it seems weird that they can just redistribute voting power at will. What if there was some minority shareholder that the other owners disliked for some reason, could they force them out too? Or this power i…

At the time the poison pill is setup no shareholder has the threshold. If you buy more shares and cross the threshold you did so in full knowledge of the effect.

If the pill were activated and you were diluted out you could sue over the economic harm e.g. that they effectively stole half your position-- and you'd quite possible be reimbursed for the dilution. But you'd be more or less back where you started, minus the mountain paid to lawyers and still without ownership of the company.

Keep in mind, these poison pills aren't really intended to prevent acquisition. They're intended to prevent an inequitable acquisition via takeover where the existing shareholders might have to sue to get a fair treatment. E.g. elon getting enough control that he can pick the board (which takes less than 51% of the shares due to voting power effects)... then the elon controlled board agrees to sell the rest of the company for a less equitable price but not so outrageous that the other shareholders would have an easy time suing over it.

> What if there was some minority shareholder that the other owners disliked for some reason, could they force them out too? Or this power is restricted to particular circumstances?

Diluting out small share holders happens with some regularity in smaller companies. They could sue over it-- but it usually happens when there isn't a lot of value in the company itself and if they failed to push out an old shareholder the company wouldn't continue. So the party being diluted can only really choose between letting it happen or fighting it and getting their fair share of nothing minus legal expenses.

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

#175

Post by krick »

MacsHeadroom wrote: post #171
krick wrote: post #155

Earlier quoted context omitted.

2. That doesn't answer my question. Actually, I'm not even sure how it attempted to. I specifically mentioned the "market price". I don't really know how these US congress persons work, and you may as well imply that the idea that they "represent" you is as much bullshit, as Musk-assigned board member represent real shareholders (and I have no problem with this implication), but there surely must be difference (and i…

>If anybody makes them sell at any price that's less than what they want — it's a robbery. No, this incorrect. Pending a shareholder vote, the board of a company can force you to accept an amount they determine to revoke the validity of your shares. If the value per share (which they decide) of a specific class of shares is not so low as to illicit concern from regulators then it's all above board.

It seems you don't understand the question. I understand that the board can decide value per share. Basically everyone in this thread said this at least once, which is unnecessary, since that's basically what was stated in the root post, and that's why I asked the question in the first place! The question is how this is supposed to be fair. Because, once again, if you make me to sell my property for anything less than I want to sell it for — yes, it totally does sound like a robbery. Again, kinda by definition (I paid money to own some entity; if you want to become the owner of what I own, you have to pay what I ask for it — this is basically how all trading works).

So, once more, my question is: what is the underlying legal idea, that makes this supposedly "fair deal"?

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

#176

Post by AlchemistCamp »

MrBuddyCasino wrote: post #35

David Sacks' take on this (thread): „Things that must be true if Twitter’s board is ready to accept @elonmusk’s offer: 1) they did a soft market check and there were no other bidders. 2) @Jack is on board. 3) the pressure campaign worked.“ (cont.) https://twitter.com/davidsacks/status/1518623080557342720?s=...

and https://twitter.com/DavidSacks/status/1518626769942679552

4) as some of the comments have noted, earnings this quarter must also be underwhelming. The next earnings call is scheduled for Thursday.

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

#177

Post by ganoushoreilly »

BLKNSLVR wrote: post #149
zmgsabst wrote: post #119

Earlier quoted context omitted.

I think two things happened: 1. Elon Musk proved he was serious by arranging the funding. 2. Elon Musk threatened to sue the board for breach of fiduciary duty — claiming the sale was a good price and shareholders were harmed by not taking it. And possibly a quiet third: 3. Twitter asked around and no one else was willing to offer a higher price — particularly given the downward trend of markets at present. I think t…

3a. Saw Netflix, panicked.

3a(1). Know their numbers are going to be crap on Thursday, double panicked

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

#178

Post by liamwire »

krick wrote: post #175
MacsHeadroom wrote: post #171

Earlier quoted context omitted.

>If anybody makes them sell at any price that's less than what they want — it's a robbery. No, this incorrect. Pending a shareholder vote, the board of a company can force you to accept an amount they determine to revoke the validity of your shares. If the value per share (which they decide) of a specific class of shares is not so low as to illicit concern from regulators then it's all above board.

It seems you don't understand the question. I understand that the board can decide value per share. Basically everyone in this thread said this at least once, which is unnecessary, since that's basically what was stated in the root post, and that's why I asked the question in the first place! The question is how this is supposed to be fair. Because, once again, if you make me to sell my property for anything less tha…

It seems you don’t understand the notion of conditional share ownership. These aren’t bearer bonds or cryptocurrency. Within the corporate structure that allowed you to be issued/sold these shares at the outset are stipulations that the board can liquidate your shares, under certain conditions. Evidently, those conditions have been met. An arbitrary definition of ‘fair’ doesn’t play into it.

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

#179

Post by jameshart »

krick wrote: post #175
MacsHeadroom wrote: post #171

Earlier quoted context omitted.

>If anybody makes them sell at any price that's less than what they want — it's a robbery. No, this incorrect. Pending a shareholder vote, the board of a company can force you to accept an amount they determine to revoke the validity of your shares. If the value per share (which they decide) of a specific class of shares is not so low as to illicit concern from regulators then it's all above board.

It seems you don't understand the question. I understand that the board can decide value per share. Basically everyone in this thread said this at least once, which is unnecessary, since that's basically what was stated in the root post, and that's why I asked the question in the first place! The question is how this is supposed to be fair. Because, once again, if you make me to sell my property for anything less tha…

The shareholders appointed the board to act as their fiduciaries in respect to the governance of the company. They voted for them. Among the powers they granted them is the power to accept an offer to buy the company.

If you bought shares after the last annual shareholders' meeting, well... presumably you were happy enough with the current board members and the company bylaws to buy the shares in the first place. You did... do some diligence before you invested, right?

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

#180

Post by friesfreeze »

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…

Wrt 2:

It's a bit complicated. The "market price" isn't really the target here, if you are talking about the price of the stock on stock exchanges. It's accepted that there is a thing called a "control premium" - basically it is more valuable to own >50% of a company because in addition to having an economic stake, you can now control the company. So when you are buying a company, you generally have to pay more (20%+) than the "market price" because you are also purchasing the "control premium".

So, there is a zero sum game going on here. That control premium is going to be divided up between the buyer and the seller based on the strength of their bargaining positions. For various reasons (poison pill included) board has a stronger negotiating position in extracting the "control premium" than do individual investors. If you weaken the current shareholder's bargaining position (by for example not allowing the board to negotiate price) you increase the share of the control premium going to the purchaser and decrease the share going to the current shareholders.

FWIW the poison pill is controversial. But from a "Law and Econ" perspective - this is the main justification.

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