Twitter's board adopts 'Poison Pill' to prevent Musk from having more than 15% stake in company

Twitter's board of directors has adopted a limited-term shareholder rights plan called a 'poison pill' that could make it harder for the richest man in the world, Elon Musk, to acquire the social media company.

The limited-term shareholders' rights plan was adopted a day after Musk offered to buy the company for $43 billion. The board voted unanimously to adopt the plan.

Under the new structure, if any person or group acquires beneficial ownership of at least 15% of Twitter's outstanding common stock without the board's approval, other shareholders will be allowed to purchase additional shares at a discount.

The move would allow existing Twitter shareholders except for Musk, the Chief of Tesla, to buy additional shares at a discount, thereby diluting Musk's stake in the company and making it harder for him to corral a majority of shareholder votes in favour of the acquisition. The move will prevent anyone from having more than a 15 per cent stake in the company.

The company in a press release said, "The Rights Plan, called the 'Poison Pill' 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 Rights Plan does not prevent the board from engaging with parties or accepting an acquisition proposal if the board believes that it is in the best interests of Twitter and its shareholders, the company said.

The plan is set to expire on April 14, 2023.

Musk currently owns around 9 per cent of Twitter's shares.

The Twitter board detailed its defence plan to the US Securities and Exchange Commission and put out a statement saying it was needed because of Musk's unsolicited, non-binding proposal to acquire Twitter. The Tesla and SpaceX CEO has offered to acquire all the shares in Twitter he does not own for 54.20 dollars per share, valuing the company at 41.4 billion dollars.