Shareholders are discriminated against all the time; companies have "preferred" and "common" shareholders. Meanwhile: nobody is actually discriminated against, because it's economically irrational to buy more than the shareholder rights plan trigger; from some light reading, it looks like no poison pill has ever been triggered (the whole point of the poison pill plan is to prevent that from happening).

As far as I know, the only instance of a poison pill being triggered was Versata Enterprises, Inc. in December 2008.

TL;DR: A competitor (Selectica, Inc.)--wishing to purchase Versata--bought over 5% of the shares. The IRS considers this an ownership change, and it imposes a penalty to discourage trading of Net Operating Loss (NOL) carryovers. A poison pill was in place to prevent this tax issue. The board executed the poison pill to dilute Selectica ownership from 6.4% to 3.9%, and that action held up through appeal to the Delaware Supreme Court.

https://www.lw.com/upload/pubcontent/_pdf/pub2563_1.pdf

Quite an interesting bit of corporate governance history. Thanks for sharing.

Do you mean held up or upheld?

the action held up; the court upheld it.

As I understand, this happens before anyone acquires 51 percent.

Is it possible to acquire up to 51% in atomic move, so there is no fade in that would make poisoning option too late ?

It would require a number of transactions as there is no single other shareholder that owns 51% in this case. So you can do a large number of transactions in a short window, which would cause the price to skyrocket. Additionally, there are disclosure requirements in place once a single shareholder reaches 5%+ ownership. Once the word gets out, everyone else starts buying.

This is the kind of thing the 15% disclosure rule is designed to prevent.

No.

The current board of twitter barely owns any shares.

https://www.barrons.com/amp/articles/how-twitter-board-stock...

The poison pill is to make it so that the person can't ever get 51% because it's not good for everyone else.

The 'short answer' to the question of 'why no poison pill' is simply because the Board reached some kind of agreement with Musk.

I like Musk when he's in his lane, I don't see any good coming from this.

Everyone is nuts to talk about 'shareholders' - who cares? As a 'consumer' - I want a good service and cheap (i.e. free) with no ads. I have zero interest in 'shareholders' of a company I'm not a shareholder in, other than legal protections.

Caring about 'shareholder value' while not a shareholder, is like caring about some rich guys bank account - when often it's a zero sum game.

Every dollar in an investors pocket should be a dollar on your pocket in term of reduced price etc..

So aside from some things he may be able to do t bring the share price up ... I'm wary that much at all will actually benefit Twitter, and he could ruin it.

I don't personally care about it, but it's an important media tool - it's how a lot of information gets out.

> Everyone is nuts to talk about 'shareholders' - who cares? As a 'consumer' - I want a good service and cheap (i.e. free) with no ads. I have zero interest in 'shareholders' of a company I'm not a shareholder in, other than legal protections.

Shareholders own the company. Which is why people care what they think.

I have preferences for how my neighbors manage and maintain their properties, but since I don’t actually own those properties, my preferences don’t mean a lot.

As a customer of a company, I can decide whether I’m getting my money’s worth. As a general observer I might have an opinion about whether the company makes the world a better place. So shareholders shouldn’t be the only story. But I don’t think it’s strange to focus on what the shareholders think, or for the company’s owners to decide on corporate direction.

My point is a lot of discussion centres around 'creating shareholder value' and 'increasing the stock price'. Many people comment on 'how to do that'.

But it's nuts - why would 'most people' who are likely Twitter 'users' and not 'shareholders' care about someone else's benefit over their own?

Twitter could very well jam up with more ads - as a sure fire way to make more money.

But not I / We are stuck with a crappier product, possibly very crappy i.e. a value transfer from our pockets, to investors.

Shareholders technically 'control' the company, they can do what they want, but what we should want them to do is 'lose money' and give the surpluses to us.

> As a 'consumer' - I want a good service and cheap (i.e. free) with no ads.

And I want world peace, people to start using their turn signals, and a pony.

We can want whatever we like. Doesn’t mean the world is going to, or even capable of delivering it.

I agree, but that's besides the point.

There is value on the table, Musk is going to try to take some away, probably in a zero-sum way.

Musk could very well jam Twitter full of ads, making it sheite for us, but more money for him.

Nobody should want that but literally a single person: Elon Musk. Everyone else, who uses Twitter, should be against it.

Why do you think Elon is more likely to make the product worse than the current management?

Twitter can make a lot more money 'right now' by focusing a lot more on ads.

Changing a few features here and there otherwise, will not somehow magically engender a ton more users.

So the 'low hanging fruit' for investors to 'unlock value' is really about ads.

More ads generally makes the product worse for users.

"I want a good service and cheap (i.e. free) with no ads."

I feel this is unrealistic. What other services are good, free and ad-free? Very few. Someone has to pay for the development cost and the upkeep, and that someone will be calling the shots.

I much prefer a "democratic" system where as a customer I pay certain amount of money for using Twitter (say, 5 dollars a month) and get a vote on future changes to a system where I am a free "user / consumer" (and a product at the same time) and some shadowy entity manipulates everything it can to its own non-public purposes.

In order to turn just a little bit more civil, Twitter needs citizens, not users/consumers. And citizens usually have to pay some tax for the system to be sustainable.

They aren't taking away anything, they would be diluting the 51% shareholder's shares. They're giving themselves the option to fend off a hostile take over by making the pool bigger so that no one can get to 51% ownership.

Sure, I accept that it's legal in the US. It just seems strange that there isn't some rule saying that the board has to treat shareholders more or less equally. Since the board is elected by the shareholder votes it seems weird that they can just redistribute voting power at will.

What if there was some minority shareholder that the other owners disliked for some reason, could they force them out too? Or this power is restricted to particular circumstances?

At the time the poison pill is setup no shareholder has the threshold. If you buy more shares and cross the threshold you did so in full knowledge of the effect.

If the pill were activated and you were diluted out you could sue over the economic harm e.g. that they effectively stole half your position-- and you'd quite possible be reimbursed for the dilution. But you'd be more or less back where you started, minus the mountain paid to lawyers and still without ownership of the company.

Keep in mind, these poison pills aren't really intended to prevent acquisition. They're intended to prevent an inequitable acquisition via takeover where the existing shareholders might have to sue to get a fair treatment. E.g. elon getting enough control that he can pick the board (which takes less than 51% of the shares due to voting power effects)... then the elon controlled board agrees to sell the rest of the company for a less equitable price but not so outrageous that the other shareholders would have an easy time suing over it.

> What if there was some minority shareholder that the other owners disliked for some reason, could they force them out too? Or this power is restricted to particular circumstances?

Diluting out small share holders happens with some regularity in smaller companies. They could sue over it-- but it usually happens when there isn't a lot of value in the company itself and if they failed to push out an old shareholder the company wouldn't continue. So the party being diluted can only really choose between letting it happen or fighting it and getting their fair share of nothing minus legal expenses.

They are treating them equally. Elon has just as much of a right to purchase those shares at the same price as any other shareholder.

Elon would not have the right to purchase the discounted shares. Only shareholders other than the one with > 15% can buy the shares for half off (till they hit the open market, of course).

Do you have a primary source for that? I don't mean news reports saying that, i mean actual legal documentation saying that's how it works? Because there's a lot of misinformation going around, and a lot of new outlets confusing cause and effect.

I find it hard to believe that would be the case, since it's needlessly discriminating against a single shareholder. The underlying game theory aspects mean that giving the hostile acquirer the warrants would be essentially irrelevant since they have no benefit in exercising them, while suffering the costs of doing so.

In short, there's no point in preventing elon from being able to purchase additional shares from the company below the acquisition offer because it would just be a waste of money for him.

The whole point of the poison pill is that the hostile shareholder is not treated equally. He would not have the opportunity to buy the discounted/newly created shares that would be triggered by him purchasing stock. In essence upon hitting the trigger he would be diluted differently to other stockholders.

Do you have a primary source for that? I don't mean news reports saying that, i mean actual legal documentation saying that's how it works? Because there's a lot of misinformation going around, and a lot of new outlets confusing cause and effect.

Took a bit of digging but I found the SEC filing [1] and the press release [2]. I'll quote from the press release because it is more easily understood. I condensed it a bit but the gist should be clear.

> In general terms, it works by imposing a significant penalty upon any person or group that acquires 15 percent or more of the shares of Common Stock without the approval of the Board.

> the rights will become exercisable if an entity, person or group acquires beneficial ownership of 15% or more... in a transaction not approved by the Board

> each right will entitle its holder (other than the person... triggering the Rights Plan, whose rights will become void...) to purchase.... additional shares of common stock

The SEC filing is a bit dense but then if you scroll down to a bit you get

> entitle the holder thereof to purchase, for the Exercise Price, a number of shares of common stock of the person engaging in the transaction having a then-current market value of twice the Exercise Price.

[1] https://www.sec.gov/Archives/edgar/data/0001418091/000119312... [2] https://www.prnewswire.com/news-releases/twitter-adopts-limi...

>Following the occurrence of an event set forth in preceding paragraph, all Rights that are or, under certain circumstances specified in the Rights Agreement, were beneficially owned by an Acquiring Person or certain of its transferees will be void.

I'm not entirely clear whether this statement in the 8K is legal. Seems to me that it would run afoul of the boards responsibilities, especially given that it is unnecessary to achieve the result.

>It just seems strange that there isn't some rule saying that the board has to treat shareholders more or less equally.

AIUI, there is such a rule, and, FWIW, that’s why I found the OP’s explanation[1] somewhat dubious. Deliberately sabotaging the corporation for the benefit of another one that the 51%er owns … seems like the kind of thing that the courts would strike down.

[1] https://news.ycombinator.com/item?id=31160874

Poison pills have been settled law in the US for decades.

Seriously, what the heck? I joined in to echo disagreement about a justification given -- one which would (dubiously) imply that you can do whatever the heck you want with the company once you control 51% (like siphoning resources to another company you fully own).

I never disputed poison pills being legal, only one comment's justification for that conclusion.

It's not responsive to simply assert that poison pills are "settled law", since I wasn't ever disputing that, and no clear-headed, good-faith reading of my post would attribute such a remark to me.

And yet ... not only do some of you think the above reply is somehow responsive (or not a strawman), you seem to think I'm wrong to simply point out how it isn't.

Someone want to tell me what's going on? Is there some deep insight I can't seem to fathom from tptacek's non-repsonsive, dismissive reply that makes it all somehow worthwhile?

Which must be why I didn’t object to that part, only to the (explanation of the legal) justification given. Could you give my comment a re-read and ensure you were replying to the right one?

They are not discriminating. Elon can purchase the same amount of stocks (proportionally) at the same price as every other shareholder.

It's just that since the strike price is lower than the price he is offering to buy the company at, other investors are better off exercising their warrants and then selling to elon.

Why do you believe that, against what Twitter board actually said and how other poison pills worked in the past?

If those who already own stock in the 49% sell, then someone else can buy up to 49% even if the 51% holder never sells.

The amount of ownership can change for one already owning 51% if the amount of stock issued changes - that changes the denominator

Finally: there is proxy voting. Normally common stock holders have 1 vote per share. However most votes are "proxy voted" where you give your vote to someone else because "reasons" - like you can't attend but an institutional investor seems to represent your position so you proxy to that investor.

Via proxy voting, it's possible to push past 51% as a minority shareholder.

Related to this, you can create an informal alliance with an institutional investor owning a larger share in the same company. This appears to be how Musk "borrowed" the money for his takeover - the money came from a large institutional investor that makes money on both ends: interest paid on the loan plus the promise of higher returns on Twitter stock. That's what's called a "can't lose investment" that no ideology can beat.

Of course, the Twitter board famously owns no significant amount of stock which is problematic but reality - this means they have ZERO skin in the game so are more likely to shirk (or risk to shirk) their legal obligations for fiduciary responsibilities. They apparently got a legal wake up call over the weekend about this however.