Twitter Board Strengthens Positioning Against Elon Musk’s Hostile Takeover

Several SEC filings made public on Monday, Apr. 18, highlight the still ever-volatile ongoing fight between Tesla CEO Elon Musk and Twitter's board of directors. The initial stance first grew into hostile territory following Musk's abrupt bid to buy the company outright at a $54.20 a share price point in cash, which the board seemingly saw as an undervalue.

According to the aforementioned SEC documents, the social media site is opting to continue its push with the poison pill maneuver, first enacted on Apr. 15. The filings write, "The board adopted the rights agreement to protect stockholders from coercive or otherwise unfair takeover tactics."

The poison pill grants the Twitter board of directors essential free reign in allocating new stock to shareholders at a reasonable price without a chance for Musk to make a bid on them. Any person or shareholder who takes a 15% overall position in the company would face a "significant penalty" as per board approval.

Musk's majority share still sits a 9% total in Twitter stock. As for the Twitter board of directors itself, much of the main ownership is taken up largely by Jack Dorsey, whose over 2% is astronomically more than the next closest board seat owner, current CEO Dr. Parag Agrawal at a 0.063% overall shares owned. Musk himself made mention of this fact in a Tweet to user Chris Bakke, saying:

"Wow, with Jack departing, the Twitter board collectively owns almost no shares! Objectively, their economic interests are simply not aligned with shareholders."

As of writing on Monday, at approximately 1:40 PM EST, the Twitter stock sits at an almost 5% bump today. Prices are soaring as the board sits in contemplation on what exactly to do next. Some theorize it will simply fold, perfecting the already extended deal on the table to appease all shareholders. On the other hand, some worry the board will drag its feet for too long and give Musk ample time to enact his so-called "plan b."

Twitter has been on the lookout for interested parties, as evidenced by recent reports that it was in talks with Thoma Bravo LLC, according to Bloomberg. While the techy private equity firm may seem like an avid owner of Twitter, another already has a significant stake in the company, Silver Lake. Given the firm's existing relationship with Musk, it might be promising for the latter to take control, but little evidence currently suggests that Silver Lake isn't in the mood to buy.

According to the social media site's founder, much of the "dysfunction of the company" is largely aimed at the board of directors. Dorsey wrote in a Twitter reply to one user that the company has been stalwart by its board "consistently." A Tweet headed by Musk also points out that he will not broach potential salary options for current Twitter board members, despite Tesla's directors making about $20,000 in an annual cash retainer.

Although Musk could potentially make a tender offer, as expressed in a very odd post via the executive, he doesn't have long to finalize his decision. Come May 25th, Twitter's annual meeting will be held to disclose the reelection of current shareholder directors. Musk could perform a power move and enact a proxy contest with shareholders to stanch voting, giving him ample time to amend bylaws and reshape the company from the inside as a majority owner.

Other reports suggest the Tesla CEO will saddle up with Oracle Corp in order to dwindle the power of Twitter's poison pill. The clock is ticking for Musk, though, as only a few months remain before the board can essentially close any potential offerings under its poison pill until the next year.