Ask HN: What happened to Twitter poison pill?

The poison pill is the name of a corporate strategy that prevents Elon from just buying 50% of the shares in the stock market and doing whatever he wants. It doesn't mean the same thing as the board saying they would rather swallow poison than deal with Musk.

Therefore, the board engaging with his bid to buy twitter, and the two of them only negotiating that way, was the goal. So it's not a 180.

The board was originally hesitant to engage because even Elon Musk could have a lot of trouble raising $44 billion in cash. They didn't want to agree to a deal that didn't go through (like trying to buy a house without cash or preapproval). He seems to have secured loans to actually pay for Twitter, so now they are seriously engaging.

I think it was more than just they didn't believe Elon had trouble raising the cash. They liked being in control of Twitter and getting easy money as board members, and didn't realise that they can get personally liable for billions of dollars of loss for shareholders and go to court for years if they don't at least consider the offer and seriously evaluate whether the offer is worth taking for Twitter shareholders or not.

Matt Levine:

The poison pill left “Musk two main options. One is to negotiate with Twitter’s board and try to strike a friendly deal. This might be hard because the board probably wants more money than Musk is willing to pay, and also because there seem to be strategic and personal disagreements between Musk and the board that might make friendly negotiations difficult. ‘I am not playing the back-and-forth game,’ Musk said in his initial proposal; ‘I have moved straight to the end.’ That’s an annoying way to start negotiations.

His other option is to pressure the board into dropping the pill, and the classic way to do that is with a tender offer plus a proxy fight, as we discussed yesterday:

1. Musk can launch a tender offer to buy all of Twitter's stock for $54.20 in cash. (Or, of course, some higher number.) The tender offer is a public, binding document filed with the SEC, open to all shareholders, and it will be full of disclosures about his plans and, in particular, his financing. Shareholders will be able to read it and see if he has the money. If it looks like he does, then they will be able to decide if $54.20 is a good enough price. If they think it is, they will be able to tender into his offer, submitting their shares for purchase. He won’t be able to buy them, though, because of the poison pill; the tender offer will be contingent on getting rid of the pill. But if like 90% of shareholders tender into his offer, then that is an important public-relations victory; he can go to the board and say “your shareholders want this deal, let them take it.” And then the board might agree and get rid of the pill, and then the tender offer can close and he can buy the shares.

2. Meanwhile, he can also try to get shareholders to vote their shares in a way that gets rid of the pill. Classically, the way to do this is to run a proxy fight to kick out the existing directors and replace them with Musk’s chosen directors, who would get rid of the pill and let him close his deal. Musk can’t really do that here, because of Twitter’s corporate structure, but he can run some sort of informal symbolic proxy fight where he urges Twitter’s shareholders to vote against the directors who are up for election in May, or where he urges them to vote to declassify Twitter’s board so it’s easier to kick the directors out in the future. If 90% of shareholders vote with him for these things, that’s another sign to the board that the shareholders want his deal and should be allowed to take it.

These things do not work automatically; even if 90% of shareholders tendered into Musk’s offer and voted with him at the annual meeting, the board could still tell him to buzz off. It could easily do that if it found another bidder willing to pay a higher price, but it could also legally do that even without a higher bid; the law tends to defer to the board’s business judgment about whether or not to accept a merger offer. But most of the time directors care about what their shareholders think, and if all the shareholders want Musk’s $54.20 then it’s embarrassing for the board not to give it to them.” [1]

TL; DR The poison pill forces Musk to negotiate with the Board.

[1] https://www.bloomberg.com/opinion/articles/2022-04-20/elon-c...

Not quite the same - pre-pill, Musk did not have funding lined up. Post pill, he produced written documents about how he was going to fund the buyout, and had to promise to buy all the shares, not just the first 51%.

Who is buying shares at $210?