Now, eyes are back on Musk to see how he might respond to the board’s defensive measure.
“This all now becomes ‘a game of high stakes poker’ between Musk and Twitter’s Board with this upcoming week likely an eventful one as we expect to formally hear from both parties on their next move in this MMA battle for Twitter,” Wedbush analyst Dan Ives said in an investor note Sunday.
With the poison pill making the prospect of a Twitter takeover more challenging for Musk, he could decide to withdraw his bid, sit tight and exercise the still-significant influence he’d have at the company as one of its largest shareholders.
But for Musk — who said just last week that he doesn’t like to lose — that may be an unlikely course of action. Musk said in his acquisition offer letter: “I don’t have confidence in management nor do I believe I can drive the necessary change [at Twitter] in the public market,” and added that he might reconsider his position as a shareholder if the board rejects his offer.
Will he launch a tender offer?
A tender offer could potentially be another trigger for the poison pill. However, Musk could launch a conditional tender offer, making the sale of the shares contingent on the Twitter board withdrawing the pill, said Ele Klein, partner and head of the M&A and Securities Group at law firm Schulte, Roth & Zabel.
“The theory of that is that if shareholders tender to that condition, he hasn’t violated the poison pill because he’s not closing it … and if enough people tender he can say to the company, ‘Look, I have the shares ready to be given to me, the only reason they can’t is because you, the board, is blocking the will of the shareholders,” Klein said.
Will he negotiate with Twitter’s board?
Musk could also respond to the poison pill by laying out his financing for the deal and future plans for the company, in an effort to gain support from Twitter’s board for his offer. The poison pill filing states that the plan is meant to “protect stockholders from coercive or otherwise unfair takeover tactics” but would not “interfere with any merger, tender or exchange offer or other business combination approved by the Board.”
“Given Musk’s antics over the years as well as comments at last week’s TED conference, [Wall] Street remains skeptical on this bid and more details need to be highlighted to get more investors on board and increase pressure on the Board,” Ives said in his Sunday note.
Still, such a scenario could present challenges because Musk and a potential private equity partner would have to agree on the future vision and strategy for Twitter.
“The board would probably have to consider this if a higher offer came in with partners,” said George Geis, a professor of strategy at UCLA Anderson. But, he added, “if there are additional partners, they all have to agree on what they’re going to do with Twitter strategically and it’s an extraordinarily complicated environment, given the political dimension of the transaction and the extent to which [Musk believes] opinions should be able to be expressed on the site.”
Will the fight escalate?
In a far less friendly move, Musk could sue Twitter’s board over the poison pill, accusing it of not acting in the best interests of shareholders, although that would likely become a drawn out fight. (And Musk’s delay in disclosing his large stake in Twitter, which the SEC could take issue with, probably wouldn’t help his argument.)
Musk could also simply attempt to continue pressuring Twitter’s board from the outside to accept his deal, something he repeatedly did on Twitter over the weekend.
“He can keep saying, ‘Shareholders want this, why are you standing in the way of it?'” Klein said.
From the surprise disclosure of Musk’s stake and the whiplash of his acceptance and then quick withdrawal of a position on Twitter’s board to his very public offer to buy the company, little has been textbook in his approach and a prolonged battle would feel almost anticlimactic.
“It’s a daily saga and it’s so much unpredictability, given the potential acquirer [Musk] and what he might do,” Geis said. “Above all, it’s going to be a fun one to watch.”