Tuesday, June 28, 2022
IndiaWhat is 'Poison Pill' and Why Twitter using against Elon Musk?

What is ‘Poison Pill’ and Why Twitter using against Elon Musk?

The day after businessman Elon Musk announced his intention to buy Twitter for about $ 43 billion, Twitter responded.

The day after businessman Elon Musk announced his intention to buy Twitter for about $ 43 billion, Twitter responded.

That is, it has used a management policy called the Poison Pill. Accordingly, one cannot buy shares of a company above a certain limit.

With this move, a shareholder can only buy a maximum of 15% of the shares. This will give other interested shareholders the opportunity to buy shares at a discount.

The Twitter board at the U.S. Securities and Exchange Commission has made one thing clear. It said: “After the announcement by businessman Elon Musk that he will buy Twitter outright without anyone asking, it is necessary to implement this” poison pill “system.”

Read Also | Twitter is testing you will be able to tweet yourself with Unmention !!! Know How to Use?

What is a poison pill?

A poison pill is officially known as a shareholder rights plan, and it can appear in a company’s charter or bylaws or exist as a contract among shareholders.

A poison pill is a maneuver that typically makes a company less palatable to a potential acquirer by making it more expensive for the acquirer to buy shares of the target company above a certain threshold.

“The whole point of it is to make the offer from the board more attractive than the acquirer,” said Carliss Chatman, an associate professor of law at Washington and Lee University.

Read Also | Elon Musk bought 9.2% stake in Twitter, what is the plan of the worlds richest person?

The strategy also gives a company more time to evaluate an offer and can give the board leverage in trying to force a direct negotiation with the potential acquirer.

The Twitter company is trying like prey trying to escape from predators. Trying to cover itself with thorns and poison.

This poison pill system has been around for decades. Has been operating. If Elon Musk buys more than 15% of the shares, Twitter will attract new shares to the market. As a result, Musk’s stocks will be diluted. This is a great result. This clearly shows that the Twitter management team is fighting against Musk’s proposal to buy Twitter.

This does not mean that Twitter does not want another company to buy itself. Rather, it deals with a technique that gives the board extra strength to resist attempts at forced acquisition. Elon Musk can no longer access partners. Elon Musk had already said that this was unavoidable.

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