Anyone have a sense of what might happen?
"Musk can launch a tender offer to buy all of Twitter's stock for $54.20 in cash. (Or, of course, some higher number.) The tender offer is a public, binding document filed with the SEC, open to all shareholders, and it will be full of disclosures about his plans and, in particular, his financing. Shareholders will be able to read it and see if he has the money. If it looks like he does, then they will be able to decide if $54.20 is a good enough price. If they think it is, they will be able to tender into his offer, submitting their shares for purchase. He won’t be able to buy them, though, because of the poison pill; the tender offer will be contingent on getting rid of the pill. But if like 90% of shareholders tender into his offer, then that is an important public-relations victory; he can go to the board and say “your shareholders want this deal, let them take it.” And then the board might agree and get rid of the pill, and then the tender offer can close and he can buy the shares."
The offer is extended to existing shareholders.
So if you own 10 stocks you will be allowed to purchase 10 more stocks at a vastly reduced cost.
Something like that.
This way you can screw over the corporate raider without screwing over existing stock holders.
"Another, perhaps more practical provision of the pill says that the board can just exchange each right for one share of stock, for free, meaning in essence that the board can double everyone else’s number of shares of Twitter while holding Musk’s constant, without asking anyone to put in more money." (From a recent Money Stuff.)
It also gives reasons why poison pills were allowed by the Delaware Supreme Court (and not the SEC).
This seems to be the root problem, and it can happen in other scenarios when a coalition controls 51% of the shares. The law needs to protect the minority shareholders.
This poison pill “solution” is just theft.
Some poison pills just give the shareholder extra shares -- it's basically a stock split except for the targeted shareholders.
In reality, this poison pill is more complicated - from Matt Levine: "The main mechanism of the pill is that if Musk or anyone else acquires more than 15% of Twitter's stock, then every other Twitter shareholder will have the right to pay $210 to acquire $420 worth of Twitter stock (at then-current market prices)."
He also points out that this is moot except in the highly unlikely event that it is triggered - in which case, someone screwed up really badly.
This is effectively the same as giving away shares.
First off, even if buying the shares at the reduced rate is highly profitable, you do need the cash to buy them. With the 50% that are floating around here that's a significant amount of cash.
Furthermore, with the dilution that's happening the stock price would also drop so while you gain on the reduced shares, you loose on money on your old shares unless Elon keeps buying.
I just don't see that it's the same as giving away shares for free (which is just adding dilution without additional capital costs for the existing shareholder). Feels to me like an all parties lose situation if it's triggered.
"Another, perhaps more practical provision of the pill says that the board can just exchange each right for one share of stock, for free, meaning in essence that the board can double everyone else’s number of shares of Twitter while holding Musk’s constant, without asking anyone to put in more money." (From a recent Money Stuff.)
Trust is a big part of stock value, if you don't trust the board is time to sell...
Edit: And as best I can tell Levine has been wrong on this situation at every step…
Perhaps when it comes to the sincerity of Elon's actions, but I'm not aware of when he's been wrong when it comes to Elon's legal options.