Do you think big ETFs just buy shares willy nilly without any due diligence on company charters and bylaws?

Index funds do, that's pretty much the definition of an index fund.

ETFs are a different concept, but a good index fund will be structured as an ETF, and it looks like this thread is using "ETF" to mean "index fund"? If so, then the answer to your question is an unambiguous yes.

This is simply incorrect. Index funds still do basic due diligence, they would not trigger this poison pill.

I’m curious what happens in that case, then - let’s say hypothetically that SPY has enough cash come into the fund that they’ll cross that threshold if they follow their stated investment policy (“buy the S&P”) - what’s the move, then?

Buy futures or other assets that will mimic the price.

The stated investment goal isn't "buy the S&P", it's "match the price of the S&P".

How far can you go with that strategy? The derivative assets aren’t going to fully move with the price, and can have much higher volatility than the asset you’re trying to avoid buying.

No, you aren’t going to have higher volatility like this than you would buy triggering a poison pill like discussed in the article.

They will talk to Twitter board and make an agreement with them to not trigger the poison pill, and continue buying shares.

Such an agreement would be reached incredibly quickly, there would be no need for stopgap measures.

From the article:

> Under the new structure, if any person or group acquires beneficial ownership of at least 15% of Twitter’s outstanding common stock without the board’s approval

If it’s a passively managed index fund, then yes, absolutely.

That is not what passive management means.

For example in the case of SPY, that would go against their stated investment objective.

They also clearly state

> the Trust may fail to own certain Index Securities at any particular time, the Trust generally will be substantially invested in Index Securities

Alright, then I suppose they’d buy up to 14.9% and then create additional long exposure thru swaps or synthetic longs using options.

Or they’d just hit up twitter’s board, enter an agreement with them, and continue buying shares as normal.

The poison pill just requires prior approval from the board, which they would happily grant in this kind of a case.

... wouldn't that imply the ETF was 15% of the market or market segment overall?

Yes, which is excessive, I agree, but there’s nothing mechanically preventing it.

So you do agree with me that this is not going to happen.