With the announcement of an offer to buy 100% of Elon Musk’s Twitter stake, Twitter’s board of directors must adopt a “poison pill” strategy to prevent hostile takeovers. Let’s get to know what Poison Pill is and how to use it.
With the announcement of an offer to buy 100% of Elon Musk’s Twitter stake, Twitter’s board of directors must adopt a “poison pill” strategy to prevent hostile takeovers. Let’s get to know what Poison Pill is and how to use it.
recently Elon Musk Has announced an offer of “Twitter” 100%, with a total value of approximately 1.5 trillion baht, however, has a nominee for the purchase of Twitter, Toma Bravo, a company outside the technology market. who are trying to find a way to buy Twitter But it is still not known exactly how much money to buy.
however Twitter’s board of directors voted unanimously on Friday (April 15) to adopt a strategy known as the “poison pill.” This gives smaller Twitter shareholders the right to purchase additional shares at a discounted price. But it may also cause the price per share of the company to decrease.
In addition, another method similar to the Poison Pill is “Poison Put,” which is a reluctant counter-domination strategy.
- What are “Poison Pill” and “Poison Put”? And how to use it to prevent being overwhelmed?
Both the “Poison pill” and the “Poison put” are defensive strategies from hostile takeovers. Also known as “Hostile Takeover” As Musk is trying to buy Twitter 100%.
as usual If it’s a friendly acquisition Neither the business or the investor, the buyer and the entity that will be acquired (Target firm) must recognize and make an agreement on the purchase of the business. which both parties often benefit together But taking over the business by gradually collecting shares until becoming a major shareholder looks like this is Hostile takeover or acquisition Because it is not with the consent of the business party who will be purchased.
when entering unfriendly Fighting back with a defensive strategy was therefore born by Poison pill, or business poisoning, is an attempt to reduce the attractiveness of a business or increase the cost of a acquisition. through the implementation of various measures For example, Twitter made a Poison pill by selling more shares to other shareholders at a discount. to cut the power of those who hold more than 15%
such method Able to simulate and explain the situation simply is when the entity catches that There are many people who buy stocks in the market. and expected to have accumulated about 25 shares, assuming the number of existing shares is 100 shares, the number of 25 shares means Ownership of the business up to 25%, but later, the entity gradually sells approximately 100 additional shares at a lower price to other investors of the Company. Right now, the rights of those who want to take over the business are reduced to only 12.5%.
From the above results, it can be seen that Twitter’s Poison pill strategy will make hostile domination more difficult. Due to the cost of increasing the shareholding is higher.
However, besides making Poison pills in this way, there are also ways Poison put Which is one of the Poison pills as well, but different in thatCorporate issuing debt instruments or debentures with a contract of right to sell (Put options) at a specified price and quantity before the expiration of the contract
Therefore, the buyer guarantees the selling price of this bond throughout the contract term of the right. even if the market price has dropped which the entity may sell to a trusted investor or current management; andSet sales prices and contract expiration dates to increase costs for the takeover.
The above actions will reduce the motivation of those who want to dominate. Because such contracts create obligations and expenses in the future. which the domination of a company like this may not be of much benefit And the cost is too high as well.
Therefore, any method to reduce the attractiveness of hostile dominance is often applicable.Poison pill strategy which by doing this willIt protects small shareholders from reluctant corporate changes. It is also a way to maintain stability in the operations of the business as well.
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