Twitter (TWTR) Adopts Shareholder Rights Plan

Limited duration plan is in response to unsolicited bid from Elon Musk

Twitter, Inc. (TWTR) announced, on April 15, 2022, a limited duration shareholder rights plan in response to the unsolicited acquisition bid from Elon Musk, CEO of Tesla, Inc. (TSLA). Often called a "poison pill," announcing such a plan is a common tactic used to thwart a hostile takeover.

Twitter states that the rights plan "is intended to enable all shareholders to realize the full value of their investment in Twitter." Specifically, it is designed to "reduce the likelihood that any entity, person, or group gains control of Twitter through open market accumulation without paying all shareholders an appropriate control premium."

Key Takeaways

  • Twitter (TWTR) has adopted a shareholder rights plan, or "poison pill," to thwart the bid from Elon Musk to acquire it.
  • The rights expire on April 14, 2023, and allow current shareholders to purchase additional shares.
  • Further details will be released by Twitter in an upcoming Form 8-K filing with the SEC.

Twitter's Rights Plan

The rights will become exercisable if an entity, person, or group acquires beneficial ownership of 15% or more of Twitter's outstanding common stock in a transaction not approved by the board. Each right will entitle its holder to purchase, at the then-current exercise price, additional shares of common stock having a then-current market value of twice the exercise price of the right.

A key proviso is that "the person, entity, or group triggering the rights plan" will not be able to exercise these rights. The rights plan will expire one year from now, on April 14, 2023.

Twitter states that the rights plan does not prevent its board of directors "from engaging with parties or accepting an acquisition proposal" if the board believes that doing so is in the best interests of the company and its shareholders.

Twitter indicates that additional details on the rights plan will be disclosed in an upcoming Form 8-K filing with the U.S. Securities and Exchange Commission (SEC).

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  1. Cision PR Newswire. "Twitter Adopts Limited Duration Shareholder Rights Plan, Enabling All Shareholders to Realize Full Value of Company."

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