Case of Elon-itis? Take one and call us in the morning (Peter Dazeley/Getty Images)
Bitter medicine… Twitter’s taking drastic measures to get rid of its Elon headache — a sign it really doesn’t want to be under the Technoking’s tweet-happy thumb. Quick recap: two weeks ago Elon Musk revealed a 9.2% stake in Twitter. He then made a $43B offer to buy the company (after declining a seat on its board). Twitter responded by creating a “poison pill” — a tried-and-true way for companies to avoid a hostile takeover.
The opposite of shareholder activism… is board react-ivism. Poison pills were invented in the 1980s to stop “corporate raiders” from taking over public companies. To date, no buyer has ever swallowed a poison pill and forced a takeover at an inflated price (they usually back down).
But poison pills aren’t 100% effective… and if anyone’s willing to swallow one, it might be Elon. With enough money and influence, it’s possible to avoid a poison pill. Theoretically, Elon could persuade 51% of shareholders to replace Twitter’s board — and then buy Twitter anyway, thereby circumventing the pill. But that would take a while, and Twitter’s board could choose another buyer in the meantime. Already, private-equity giants Thoma Bravo and Apollo are reportedly considering bids.