'Poison pill' to 'tender offer': Decoding Musk's Twitter takeover strategy
For those who are wondering whether Elon Musk gave up on his pursuit of Twitter, well, you shouldn't. Musk has secured $46.5 billion in financing and is considering making a tender offer, according to a fresh filing. Under the tender offer, he would bypass the board and approach the shareholders directly. Meanwhile, Twitter's board has taken the 'poison pill' to counter Musk's hostile takeover.
Why does this story matter?
The Twitter v/s Elon Musk saga is entering new spheres as Musk mulls whether to move forward with a tender offer. The pertinent question is how the 'poison pill' adopted by Twitter's board will kick in. If the board decides to go through with it, it will dilute Musk's shares and block his tender offer, but will also affect the valuation of the company.
The financing includes $25 billion in debt from Morgan Stanley
Musk triggered the rumors of a tender offer with his tweet "Love Me Tender." As per the filing submitted to the US Securities and Exchange Commission, Musk has $46.5 billion in financing commitments. The total amount reportedly includes $25.5 billion in debt from Morgan Stanley and $21 billion in equity financing, which also includes $10-$15 billion of his own money.
What is a tender offer?
A tender offer is usually submitted along with takeover bid. If Musk takes it forward, he will make a public announcement with an offer to buy certain shares at a specific price, bypassing the board. The shareholders will decide whether to accept it or not.
'Poison pill' will dilute Musk's holding in Twitter
In response to Musk's bid to buy Twitter's shares at $54.20/share, the board of directors adopted the 'shareholders-rights-plan' or the 'poison pill' strategy. This gives the board the right to issue shares at a discounted price to existing investors if Musk's ownership breaches the 15% mark. This in turn will dilute Musk's holding and make his takeover bid prohibitively expensive.
We will defeat the spam bots: Musk
Meanwhile, Musk, famous for his eccentric posts, has tweeted that "If our twitter (sic) bid succeeds, we will defeat the spam bots or die trying!" He added that authenticating "all real humans" is also part of his agenda if his takeover bid succeeds.
