Twitter, the social media behemoth that continues to enchant the financial world amid growing stakes in a takeover deal, may now face a tender offer from Tesla CEO Elon Musk. Musk has hinted about a tender offer in a cryptic tweet, which permits a prospective buyer to circumvent the target company’s board of directors and buy shares directly from ordinary owners. Of course, Twitter’s board of directors has taken countermeasures as well, the most notable of which is a poison pill precaution.
We don’t know some key specifics regarding this move since Twitter hasn’t filed the required paperwork with the SEC as of this writing. Nonetheless, according to Twitter’s press release from Friday, the poison pill would probably be triggered if any entity buys a 15% or more ownership in the firm without the board’s agreement. Once activated, the poison pill will stay active until April 2023, giving other Twitter shareholders the option to acquire more shares at a yet-to-be-determined exercise price, which is estimated to be roughly half of the current stock price.
We also don’t know whether the poison pill will attempt to prevent other significant investors from collaborating with Musk on his takeover effort. That does not seem to be the case at first glance. If that’s the case, Musk might launch a coordinated campaign with private equity firms like Silver Lake Partners, which aided Musk when he was considering taking Tesla private in 2018. Indeed, as reported by the New York Post over the weekend, such a scenario seems to be quite plausible.
According to Bloomberg and Reuters, Twitter has also garnered takeover interest from the private equity company Thoma Bravo, putting the whole scenario in a near-constant state of change.
Meanwhile, over the weekend, there was some uncertainty over Twitter’s board’s ostensibly minor shareholding in the firm. The following excerpt provides the most recent picture of Twitter’s insider ownership. Keep in mind that this data only contains the percentage of RSUs and PRSUs that vest within 60 days of Form DEF14A’s filing date of record.
Because the bulk of Twitter’s board members is newcomers, most of their RSUs and PRSUs have yet to vest, giving the company an artificially low level of insider ownership. All Twitter executive officers and directors possess only 2.7 percent of the outstanding shares, excluding RSUs and PRSUs that vest beyond the 60-day restriction from the date of record.
Keep in mind that portraying Twitter’s board members as having conflicting interests with shareholders is in Musk’s best interests. Musk’s allegations in court that the board is not sufficiently invested in Twitter’s success would be bolstered by a notional board interest in the firm. Of course, Elon Musk is no longer the biggest shareholder in Twitter; that honor now belongs to the Vanguard Group, which owns 82.4 million shares, or 10.3 percent of the company.