Elon Musk & The Poison Pill

What is a Poison Pill?

Elon owns 9% presently. It will trigger the shareholder rights if he or anyone else hits 15%. If this happens, all the existing shareholders get to buy additional equity at a reduced price, which dilutes the hostile acquirer’s equity. Generally, the poison pill allows existing shareholders to purchase freshly issued shares in a company at a discount, making any possible buyout too expensive for the party planning a hostile takeover. I also shared other examples in this episode, ranging from the poison pill involving Netflix in November 2012 to the one involving the Men’s Warehouse in 2013 and the poison pill involving Papa John’s in July 2018. Check out the episode to sip all the tea!

The Truth Behind The Poison Pill

In theory, if he’s willing to pay that, the stock price will go up, which would benefit the shareholders. They have to work harder to show there are more downsides to the potential acquisition. People, including Musk, could challenge the board’s decision as a breach of their fiduciary duty and try to show that it’s not in the company’s best interest.

Lawyers also prefer to maintain operations in Delaware because it has a rich history of over a hundred years and cases in this category. We recommend Delaware to any client trying to own a majority stake because it protects companies, founders, and majority shareholders against those claims.

  • The companies are likely in Delaware or similar states
  • The firms have become more sophisticated in making sure they properly justify these decisions, so it’s hard to meet those standards. Not impossible, but way harder.

How Does This Relate To The Twitter Case?

I believe Elon Musk’s team saw that the poison pill might be a problem, and they already have a strategy in place. We are in for an exciting showdown.

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