Social media giant Twitter has introduced a plan to limit billionaire entrepreneur Elon Musk's potential stake in the company after he made a $43 billion non-binding bid to buy the whole company.
Responding to Musk's bid, Twitter's board adopted a limited duration shareholder rights plan called a "poison pill" that makes it difficult for Musk to increase his stake beyond 15%.
The billionaire founder of Tesla already owns a more-than 9% stake in Twitter.
"The board adopted the rights plan following an unsolicited, non-binding proposal to acquire Twitter," the social-media company said in a statement.
The rights plan will expire on April 14, 2023.
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, Twitter said.
Transaction not approved
Twitter noted that 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.
Under the rights plan, the rights will become exercisable if an entity, person or group acquires beneficial ownership of 15% or more of Twitter's outstanding common stock in a transaction not approved by the board.
In the event that the rights become exercisable due to the triggering ownership threshold being crossed, each right will entitle its holder to purchase, at the then-current exercise price, additional shares of common stock having a then-current market value of twice the exercise price of the right.