Twitter pops a “poison pill” to block Elon’s buyout. One possible side effect: selling to someone else.

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.

• How it works: If Elon tries to buy 15% of Twitter’s shares, the pill kicks in and lets every shareholder except Elon buy shares at half price — making a buyout way costlier for him (and diluting Twitter’s stock in the process). Twitter’s board voted unanimously to adopt the plan for one year.

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).

• Taking their pills: Netflix used a poison pill to stop activist investor Carl Icahn from taking over in 2012, and Papa John’s adopted one to prevent disgraced founder John Schnatter — Papa John himself — from regaining control in 2018.

THE TAKEAWAY

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.