The board is negotiating an approved takeover which is entirely different
I.e. the board was saying “you can only buy Twitter if we say so”
There was no reversal of intentions
> Twitter adopted a limited duration shareholder rights plan, often called a “poison pill,” a day after billionaire Elon Musk offered to buy the company for $43 billion, the company announced Friday.
https://www.cnbc.com/2022/04/15/twitter-board-adopts-poison-...
This seems to be what happened.
> I.e. the board was saying “you can only buy Twitter if we say so”
The board say "you can't buy twitter". So elon just talked to the board's bosses ( major shareholders ) and the board's bosses said "elon can buy twitter".
Yeah, probably as qiskit suggested, because the major shareholders told the board to pull their heads in and take the money.
At least that’s my understanding.
There was no "negotiation" with the board. Elon just made an unsolicited offer and said take it or leave it. The board "left it" and yet here we are.
> If Elon had made a deal directly with the stockholders, that would have triggered the poison pill.
What? That's not how poison pills work. Poison pills exist to prevent hostile takeovers. It isn't there to prevent someone from talking to the stockholders. If the stockholders agree to the deal, it is no longer a hostile takeover.
> He surely spoke with and lobbied the stockholders for support, but the deal he agreed to was approved by the board.
Yes. The deal was first rejected by the board. And then the deal was approved by the board. Why do you think that was? What made the board change their minds? I wonder. You might have a point if elon raised his offer from $54.20 to a much higher number. But all reporting indicates he didn't change his offer.
Of course the deal was approved by the board. My point is that the shareholders made them approve the deal.
You really don't know how this works.
https://www.youtube.com/watch?v=98EzC_1GvGE
There have been tons of cases about this, where boards ignore rights of shareholders or those with minority interests.
Shareholder pressure, which was rumored to include governors and ag's in states with pension investments in twitter who don't like twitter, was out there.
They risked a decline of twitter's stock price if Elon withdrew his offer AND sold his (largish) block of shares AND announced a competing service with some of his billions.
Twitter has its HQ in SF, but that doesn't mean it can blow florida pension money because they don't like musk.
So yes, the board, taking into consideration shareholders and their duty there, may have been in a tough spot. It certainly doesn't seem like they got any increase in price.
Source?? The deal was never rejected by the board. Instituting a poison pill was not a rejection. Twitter made it clear with the poison pill anouncement that they had not decided on Musks offer yet.
> 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,” the company said in a press release.
> Twitter noted that the rights plan would not prevent the board from accepting an acquisition offer if the board deems it in the best interests of the company and its shareholders.
https://www.cnbc.com/2022/04/15/twitter-board-adopts-poison-...
Major shareholders don't care who owns Twitter. They don't give permission. They only care about the return on their investments. They often represent limited partners or are part of a stock fund, and have their own fiduciary responsibilities. Or they just want to make their own money.
In this instance, major shareholders would go to the Board and say, "show me your plan to increase the stock price to over $54/share within 12 months." This could be by finding another buyer, having a roadmap to introduce new products/enter a new market, raise prices, or even acquire another company. Shareholders would evaluate the execution risk of said plan vs. the zero risk of "Elon gives me $54/share tomorrow" and decides what is best for them.
The shareholder then weighs in to the board: "I don't believe in your plan, if it comes to a vote I will vote in favor of Elon's offer." Repeat that for all of the major shareholders.
In this specific case, from everything I've read Twitter had no compelling roadmap, no other buyers willing to make an immediate offer, no strategy, troubled leadership, a 10% decline in stock price, and prevailing economic headwinds. No one believed they could beat Elon's offer.
So the board looks at the intent of the preponderance of the shareholders and rapidly realizes that they would lose any battle for control of the company. It would cause huge distraction and possibly open them up to lawsuits for not meeting their fiduciary responsibilities.
The board then goes back to Elon and decides to accept the offer.
For example, if you use META as the benchmark then Elon's offer is 143% of Twitter's all time high. Meta alone is perhaps not really the fairest benchmark, but his offer is 86% of the ATH if you just use the Nasdaq composite as a benchmark which is still pretty good. A fair 'synthetic twitter' would probably price the offer somewhere between these two.
I would have liked to produce a better synthetic benchmark than just those two options, but didn't really feel like doing two hours of programming and data collection just for a HN post-- what I would have done is grabbed the historical prices for all high volume US equities and ETFs and found a set of coefficients (including allowing negative ones, e.g. shorted stocks) for all equities except twitter that predicted twitter with the lowest L2 norm, and maybe applied some L0 penalty to make the collection sparse and reduce the overfit. Perhaps I'd just try all $stocks choose 5 subsets with 5 stocks and choose the best-- l2 fits are fast, and I doubt 5 stocks can meaningfully overfit a couple years of data.
Why is a benchmarked price the right way to reason about this? Because a substantial part of twitter's price is the overall market, a substantial portion is its sector, etc. To the extent the investors want that non-twitter-specific exposure they can get it in other ways (e.g. by buying synthetic twitter or just a market index).
If you could sell twitter today for 143% of the benchmark rate, then put the income into the benchmark then sell the benchmark later when its value goes up-- you'd do much better than just holding on to twitter for the same amount of time, unless something changed about twitter to make it perform a lot better relative to the benchmark.
From that perspective twitter's roadmap would need to be pretty good to overcome the offer.
Musk has spent the last days talking to other big shareholders as is widely reported in mainstream news. It's not some far fetched conspiracy theory.
Yes, technically it is correct that this combined shareholder pressure does not oblige the board to comply, but for sure this adds a ton of pressure. Even more so given the malperformance of Twitter as a company.
Add to that the weakness of the board which has zero founders, and none owning any meaningful amount of shares themselves.