Ask HN: What happened to Twitter poison pill?

#1

Post by rukshn » Mon, Apr 25, 2022, 5:22 PM UTC

Last week it was said that Twitter's directors will take a poison pill instead of selling Twitter to Elon Musk.

What caused the board to change the direction 180 and now closing the deal with Musk?

Can anyone shed a light on that, I didn't see anyone talking about this.

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

#2

Post by ttyp3 » Mon, Apr 25, 2022, 5:27 PM UTC

I don't have to know, to know: $$$.

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

#3

Post by dtagames » Mon, Apr 25, 2022, 5:36 PM UTC

Having zero knowledge of it, I would say that, since a poison pill is merely an option for existing shareholders to buy more shares, if they don't get enough takers for that option, then there's no news to print and no offer to compete with Elon's.

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

#4

Post by axg11 » Mon, Apr 25, 2022, 5:45 PM UTC

The poison pill provision and Elon's takeover are not mutually exclusive. It's in the board's best interest to gain maximum leverage over Elon. A poison pill puts the board in a better negotiating position in discussions with Elon allowing them to get better terms. Once terms are agreed they are free to repeal the poison pill.

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

#5

Post by UmYeahNo » Mon, Apr 25, 2022, 5:45 PM UTC

My understanding was that the poison pill would not kick in until someone owned 15% of the common shares[0]. Musk owns less than that, so the poison pill has not activated. However, Musk claims to have funding for an offer such that he did not need to buy the shares to reach 15%, instead he just said, I want to buy them all -- everything for $46.5B.

[0] https://www.cnbc.com/2022/04/15/twitter-board-adopts-poison-...

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

#6

Post by esotericimpl » Mon, Apr 25, 2022, 5:45 PM UTC

The poison pill can be used by the board of directors in case of a "hostile" takeover of the company.

In the case of a non "hostile" takeover, meaning the board approves the takeover price there is no poison pill to be used.

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

#7

Post by eurasiantiger » Mon, Apr 25, 2022, 5:45 PM UTC

The idea of the ”poison pill” is to make it possible for board members to strenghten their ownership by issuing new shares to existing owners with a discount in the event that one single outside entity buys a significant portion of the shares.

It is artificial dilution, which in practice makes it possible for the board to cause heavy short-term losses to anyone attempting a hostile takeover: the market reaction to dilution is predictably a lowering of the going price of the stock unless the news comes with significant and credible hype about future profits.

The risk of this happening is what is thought to stave off the takeover.

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

#8

Post by incomingpain » Mon, Apr 25, 2022, 5:58 PM UTC

The poison pill says elon cant buy more but current shareholders can buy more at a discount relative to the stock market. Basically Elon was just going to shell out slightly more money or fail and everyone who didn't buy is screwed.

It however takes shareholders to want to buy more. Twitter is quite undefended. Poison pill was never going to be effective in any major way. At most they were going to delay the inevitable here.

The media coverage of the poison pill was pretty bad, this was not going to be effective at stopping anything. The bigger news is why is Twitter so undefended. It makes sense from Jack Dorsey's pov, he was backing off. However even a saudi prince incorrectly believed he still owned twitter stock. It's super unusual for a S&P500 company to be so undefended.

Yet worse, something that I have never seen happen, there are a ton of S&P500 companies that are undefended. This isn't true in other country indexes. What made the US stock market so offensive? I checked all my US holdings and somehow each of them are healthy with the only exception being Tyson. The stock market is going to blow up?

DOW is down -7% YTD. S&P500 is down -11% YTD. With inflation at 8.5%, those are down alot.

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

#9

Post by uf00lme » Mon, Apr 25, 2022, 5:59 PM UTC

Like everything in finance, simply talking or threatening something is enough to make it real. The actual pill or action is rarely ever wanted or needed, it’s like the meta verse of bluffing.

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

#10

Post by fancyfredbot » Mon, Apr 25, 2022, 6:13 PM UTC

What changed is that Elon Musk secured funding, making his offer much more credible and forcing the board to reconsider. The poison pill is still there for now but the board can remove it as easily as they added it.