You can always count on Twitter to do the wrong thing. And perhaps my account will be locked for saying so.
After establishing itself as the premier censorship organization in America, Twitter has now adopted what’s derisively known as a “poison pill” strategy to foil an acquisition offer of $43 billion from Elon Musk who’s only real offense is a desire to rejuvenate the media platform to promote free speech, not stifle it.
The only thing the pill is managing to poison are the interests of the shareholders.
Those same shareholders should now sue Twitter for embracing a plan that is both an illegitimate defensive mechanism and destructive in value. Instead of maximizing shareholder value, the company’s board of directors seeks to dilute it while pretending that its stock owners will benefit financially in the long run. As with many “poison pills,” it’s a charade.
Musk’s offer of $54.20 a share is generous given that the existing stock price of Twitter hovers around $45 which is substantially higher than its $39 price before he announced his bid. It’s an all-cash offer. Therefore, shareholders are not being threatened with a highly structured “coercive” bid which the law frowns on.
Photo by SUZANNE CORDEIRO/AFP via Getty Images
The takeover offer is more than fair when you consider that “Twitter lost $221 million in 2021 and $1.1 billion in 2020,” as The Wall Street Journal noted. Musk is doing shareholders a financial favor. Naturally, the entrenched and insular board doesn’t see it that way. Those members care only about protecting themselves at the cost to the people who actually own the company.
The board’s drastic plan to thwart the buyout is to offer existing shareholders —sans Musk— the right to purchase additional common stock at a discounted price. That might sound reasonable until you consider how flooding the marketplace with even more shares will likely diminish their overall value.
Twitter is incorporated in Delaware where “poison pill” devices have been generally, albeit incorrectly, upheld. However, there is an important exception to the rule. They are only valid when the company’s offer is superior to the hostile bidder’s offer.
This is where Twitter’s “poison pill” fizzles. Musk’s cash bid portends greater value to the average shareholder who has watched with frustration as the company’s stock has languished for years. Mismanagement can rightly be blamed that.
Twitter’s board of directors feels threatened by Musk, as they should. Their reign of suppression would end if the richest man in the world gains control. No more protecting Joe Biden by banishing New York Post stories about his son’s corrupt influence peddling schemes. No more disabling accounts because they fail to promote a “woke” culture or conform to Twitter’s progressive ideology.
Is it any wonder that all the virtue signaling liberals at Twitter are suffering a major meltdown over the notion that their social media platform might be used for an expression of diverse opinions and freedom of thought? They are apoplectic that anyone who dares to disagree with them could utilize Twitter to say so.
“Twitter has extraordinary potential. I will unlock it,” proclaims Musk. And that is precisely what the company fears. Twitter is deathly afraid of a fair and inclusive platform. What it cannot seem to grasp is the corresponding harm that its political and social bias is causing to the company and those who own its shares.
Broadening Twitter’s appeal will invariably expand its user base, if only it would choose the right course and unshackle itself. Greater profitability will follow.
The board’s refusal to allow shareholders to vote on Musk’s proposal and to swallow instead a “poison pill” is exactly what the term implies —self-destructive. It also constitutes a failure of corporate governance.
Even if Musk throws up his hands and walks away, shareholders would still be justified in suing Twitter for its breach of fiduciary duty over the lost opportunity.
Let the lawsuits begin. Maybe that will get the directors’ attention. But I doubt it.
