Twitter Adopts 'Poison Pill' Defense Against Musk's Takeover Bid

The limited-duration shareholder rights plan makes it tougher or more expensive to acquire the company.

Queenie Wong Former Senior Writer
Queenie Wong was a senior writer for CNET News, focusing on social media companies including Facebook's parent company Meta, Twitter and TikTok. Before joining CNET, she worked for The Mercury News in San Jose and the Statesman Journal in Salem, Oregon. A native of Southern California, she took her first journalism class in middle school.
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Queenie Wong
2 min read

Elon Musk wants to buy Twitter.

Sarah Tew/CNET

Twitter is fighting Elon Musk's attempt to take over the company.

On Friday, the social media company said it's adopting a limited-duration shareholders rights plan, a tactic known as the "poison pill" defense that's used by companies to fend off takeover attempts like the one facing Twitter. Poison pills make it difficult for a potential buyer to acquire a majority of a company's shares by making more of them available.

"The Rights Plan will 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 or without providing the Board sufficient time to make informed judgments and take actions that are in the best interests of shareholders," Twitter said in a press release

The expected move marks Twitter's first step in fighting Musk's offer to buy the company for $54.20 per share, a proposal that was made public on Thursday. His offer values Twitter at more that $40 billion. He already owns more than 9% of the company.

Musk, who leads Tesla and SpaceX, said in a filing with the US Securities and Exchange Commission that he wants to buy Twitter to safeguard free speech. The First Amendment, though, applies to government censoring speech, and companies like Twitter are allowed to make rules about what can be posted on their services. 

The bid has fueled questions about Twitter's future and impacted employee morale at the company. Musk said the offer was his "best and final" and that he would have to reconsider his investment in Twitter if the company rejects his offer. Musk is one of Twitter's largest shareholders.

Twitter said the rights plan, which expires on April 14, 2023, will come into play "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." 

It doesn't prevent the board from accepting an acquisition proposal or engaging with other parties if the board thinks it's in the best interest of the shareholders, Twitter said.

If Musk acquires 15% or more of Twitter's stock, then shareholders other than him will be able to buy more shares at a discounted price. That makes it more expensive for Musk to increase his stake in the company. Purchasing shares also comes with voting rights. Musk has been calling for a shareholder vote on his offer, and Twitter's poison pill defense also makes it tougher for him to get enough votes in favor of the acquisition.

On Friday, Musk didn't address the poison pill directly on Twitter, but he retweeted a poll showing support for his possible purchase of Twitter. He added, "Thanks for the support!" He didn't answer questions on Twitter about the social media site's latest move. 

Musk said in a TED Talk on Thursday that he has a "Plan B" if Twitter rejects his offer, but he hasn't revealed what it is.