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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?

#231

Post by georgeecollins »

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…

Imagine the reverse situation, where the board could not decide on the price everyone got per share but did let someone get a controlling stake. I could by 51% of a company for $10 per share and then use my controlling interest to pay myself a consulting fee that was the profits of the company. I could offer the rest of the shareholders $1 for their shares, knowing that I would never let them make any money off of them. When someone takes control you have to try and make sure that at the moment they take control every everyone is paid equally. It doesn't always work like that, but I hope this helps you understand the fairness of setting a price for the remaining shares when someone is in a position to take control of a company.

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

#232

Post by strken »

liamwire wrote: post #178
krick wrote: post #175

Earlier quoted context omitted.

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.

I think the question is more to do with how we can have an economic system largely based on shares that can be rug-pulled from under a shareholder at any moment. How come governments don't legislate against it? How come anyone trusts shares enough to buy them?

At a guess I'd say the answers to the two questions are "they do legislate against some behaviours, but blocking hostile takeovers is worse than allowing them" and "the risk of that happening is built into the market price," but I don't actually know.

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

#233

Post by benrow »

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…

Tangential, but there was an interesting Lex Fridman podcast recently featuring Michael Saylor, on the advantages of bitcoin as a 'property' as opposed to a 'security' (such as shares).

I mention it here as I hadn't thought about this beforehand, and many examples were given in that podcast of the advantages of property (bitcoin, real estate, barrel of oil) compared to securities (shares). Less potential for conflict of interest, stronger concept of ownership and stability over time.

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

#234

Post by somenameforme »

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 board cannot unilaterally decide the share price. The deal will only be finalized once, among other things, it's approved by shareholder vote. But that is largely a formality. The largest shareholders are going to be institutional and not ideological, and $54 is way higher than most (all?) estimations for Twitter's value. Incidentally the same reason that refusing this deal would have exposed the board to personal legal risk.

As for why it's fair - a share doesn't represent ownership of a company, it represents a voting share in an abstract entity. Normally these are pretty close to the same thing, but there are important distinctions - such as here. When Twitter goes private the abstract entity it used to be will cease to exist, along with all voting rights in such.

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

#236

Post by jdasdf »

zwily wrote: post #169
jdasdf wrote: post #96

Earlier quoted context omitted.

They are treating them equally. Elon has just as much of a right to purchase those shares at the same price as any other shareholder.

Elon would not have the right to purchase the discounted shares. Only shareholders other than the one with > 15% can buy the shares for half off (till they hit the open market, of course).

Do you have a primary source for that? I don't mean news reports saying that, i mean actual legal documentation saying that's how it works? Because there's a lot of misinformation going around, and a lot of new outlets confusing cause and effect.

I find it hard to believe that would be the case, since it's needlessly discriminating against a single shareholder. The underlying game theory aspects mean that giving the hostile acquirer the warrants would be essentially irrelevant since they have no benefit in exercising them, while suffering the costs of doing so.

In short, there's no point in preventing elon from being able to purchase additional shares from the company below the acquisition offer because it would just be a waste of money for him.

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

#237

Post by jdasdf »

throwawaythekey wrote: post #147
jdasdf wrote: post #96

Earlier quoted context omitted.

They are treating them equally. Elon has just as much of a right to purchase those shares at the same price as any other shareholder.

The whole point of the poison pill is that the hostile shareholder is not treated equally. He would not have the opportunity to buy the discounted/newly created shares that would be triggered by him purchasing stock. In essence upon hitting the trigger he would be diluted differently to other stockholders.

Do you have a primary source for that? I don't mean news reports saying that, i mean actual legal documentation saying that's how it works? Because there's a lot of misinformation going around, and a lot of new outlets confusing cause and effect.

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

#238

Post by Rastonbury »

zmgsabst wrote: post #119
hammock wrote: post #102

Earlier quoted context omitted.

Your reply merely clarifies that this sale is not a hostile takeover. It doesn’t seem to answer the question, “What caused the board to change the direction 180 and now closing the deal with Musk?”

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…

Regarding #2, it isn't so simple for the board, they have large institutional shareholders and sovereign wealth funds, including activist Elliot Management who can sue the board if they think the board is accepting a offer too low. Elliot[1] famously sued the country of Argentina and seized one of their warships when they defaulted on their debt which Elliot owned, they're the ones who pushed for Dorsey's exit, interesting to see if they will take the offer or squeeze Musk

[1]https://qz.com/1001650/hedge-fund-billionaire-paul-singers-r...

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

#239

Post by mrtesthah »

tempnow987 wrote: post #224
xyzzy21 wrote: post #73

The legality of a poison pill is defined by case law of of Unocal vs. Mesa Petroleum. https://en.wikipedia.org/wiki/Unocal_Corp._v._Mesa_Petroleum... . Basically a company can ONLY create a poison pill IF and ONLY IF: * the tactics of the party doing the hostile takeover are "coercive" * the hostile takeover will likely result in dissolution of the company Neither applies to Twitter in any serious sense. Musk's metho…

Why are you getting down voted? I'm serious, it's weird. A lot of views here that board can do anything it wants, can destroy shareholder value through poison pills for political reasons etc. No. There were actually threats by pension funds in right wing states to come after twitter if they didn't do the deal and imploded it for political reasons. The downside to the stock from a) loss of offer, b) sale of musk share…

You keep posting this same statement over and over again -- it's starting to look like you're pushing an agenda.

The truth is, that no, corporations do not have overriding fiduciary obligations to their shareholders in the simplistic way that you seem to be inferring. This cannot be legally enforced so expeditiously. You seem to be taking your position from youtube and political opinion pieces (e.g., reframing the vindictive and opportunistic threats of right-wing AGs) rather than corporate law.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1352595

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

#240

Post by nicky0 »

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…

> what is the underlying legal idea, that makes this supposedly "fair deal"?

Every public company has articles of association which define the rules determining things like this. By purchasing a share you agree to those articles of association. You can’t just say “hold up I didn’t agree to this”, because you did.

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