Elon, Twitter and The Poison Pill!
Elon Musk is now the majority shareholder of Twitter. On April 4th 2022, Musk announced (via a tweet) that he had acquired a 9.2% stake in one of the most popular social media platforms in the world.
Following this bombshell, speculation has been rife about what this means for the future of Twitter. And the drama continues to unfold. On April 14th, Elon Musk made an offer to purchase 100% of Twitter’s shares for a staggering 41.4 billion dollars. The board are resisting this move by adopting a ‘Poison Pill’ defence.
Why Does Musk Want Twitter So Bad?
It’s fair to say that Elon is a modern force of nature in the tech and business world. Like all forces of nature, he’s unpredictable. There are a thousand analysts and a billion laymen all speculating about the Twitter takeover bid. Here, let’s limit ourselves to what the man himself has actually said, and think about what that means for the future of Twitter.
Musk’s relationship with Twitter is not straightforward. The Silicon Valley billionaire has amassed an 80 million strong following and tweeted around 5000 times. Despite this apparent partiality, he has been increasingly outspoken in his criticism of the platform. Let’s look at just a few examples:
- On March 26th, just 9 days prior to the announcement, Elon Musk tweeted “Given that Twitter serves as the de facto public town square, failing to adhere to free speech principles fundamentally undermines democracy. What should be done?” This question assumes 2 things: 1. That Twitter is failing to adhere to free speech and 2. That something should be done about it.
- Siddarth Pai, a venture capitalist, suggested a ‘Fake News Rating” in a tweet to Musk. The response was “Fake news purveyors would have hysterics, but a ratings system would improve quality of news greatly.”
- It has long been a refrain of the Tesla CEO’s that the Twitter algorithm should be open source. This would mean that code used to prioritize Tweets, suggest users to follow and make other recommendations, would be open to public scrutiny. This would represent a huge change in not only the way Twitter operates, but to the social media landscape in general. From a developer’s point of view, making Twitter open source would open up a lot of opportunities.
All together, these changes amount to a radically altered Twitter.
What is the ‘Poison Pill?’
Twitter has adopted a ‘Poison Pill’ defence. If you filter through all the business jargon, you can get a clear outline of what this actually means. It’s essentially a strategy that’s intended to block a hostile takeover bid by diluting the share value of the shareholder in question. In practice, this works by allowing current shareholders to buy additional shares at a discounted rate, effectively diluting Musk’s ownership.
The ‘pill’ will be triggered if the current majority shareholder buys more than 15% of Twitter’s shares.
The Twitter board voted unanimously in favour of adopting the ‘poison pill’ defence, which suggests that this move from the tech baron is no foregone conclusion. We’re all on tenterhooks watching this drama unfold. Whatever the outcome, it has far reaching implications for professionals working in the tech space.