The board unanimously chose to adopt the “limited duration shareholder rights plan” after an “unsolicited, non-binding proposal to acquire Twitter,” the company said.
Under the approved provision, if any entity, person, or group acquires 15 percent or more of Twitter’s outstanding stock in a transaction not approved by the board, other stock holders will be able to buy additional shares of common stock at a lower price.
The shareholder 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,” Twitter said.
The poison pill method has been approved by other companies in the past to dilute outstanding stock and make a hostile takeover more financially challenging for the potential acquirer.
More details of the plan will be outlined in a form that Twitter will file with the U.S. Securities and Exchange Commission.
The board includes Bret Taylor, co-CEO of Salesforce; Parag Agrawal, Twitter’s CEO; Jack Dorsey, Twitter’s co-founder; and Mimi Alemayehou, a senior vice president at Mastercard.
Mark Meckler, former acting CEO of Parler, a Twitter competitor, told NTD that whether or not Twitter’s action works depends on whether people take advantage of it.
Musk had said on Twitter, responding to a rumor that the company was considering implementing such a provision, that the move could expose the board to a “titanic” amount of liability because they would be “breaching their fiduciary duty.”
Adam Candeub, a law professor at Michigan State University, told The Epoch Times before the decision was announced that the board could face legal consequences if they turn down an offer that’s financially lucrative to shareholders.
“Twitter’s owned by shareholders, and the directors have to act in a way that’s in their best interests, not in the way that allows them to keep control of the corporation,” Candeub told The Epoch Times.
“If they turn down a very favorable price, there will be dereliction of their legal duty, and there could be lots of legal consequences.”
Emel Akan and Tom Ozimek contributed to this report.