Twitter adopts 'poison pill' as challenger to Musk emerges
Twitter Inc. adopted a "poison pill" on Friday to limit Elon Musk's ability to raise his stake in the social media platform, as a buyout firm emerged to challenge his $43 billion bid for the company.
Thoma Bravo, a technology-focused private equity firm that had more than $103 billion in assets under management as of the end of December, has informed Twitter that it is exploring the possibility of putting together a bid, Reuters reported on Saturday citing people familiar with the matter.
Twitter said on Friday it adopted a poison pill that would dilute anyone amassing a stake in the company of more than 15 percent by selling more shares to other shareholders at a discount. Known formally as a shareholder rights plan, the poison pill will be in place for 364 days.
The move would not bar Musk from taking his offer directly to Twitter shareholders by launching a tender offer. While the poison pill would prevent most Twitter shareholders from selling their shares, the tender offer would allow them to register their support or disapproval of Musk's offer.
Thoma Bravo's interest raises the specter of more private equity firms vying for Twitter. The global private equity industry is sitting on about $1.8 trillion in dry powder, according to data provider Preqin. Unlike major technology conglomerates, most buyout firms would not face antitrust restrictions in acquiring Twitter.
It remains possible that a private equity firm will boost Musk's bid by partnering with him rather than challenging him. Musk's criticism of Twitter's reliance on advertising for most of its revenue, however, has made some private equity firms apprehensive about teaming up with him, industry sources said. This is because a strong cash flow makes financing a leveraged buyout much easier.
Twitter has more than $6 billion of cash on its balance sheet and its annual cash flow is close to $700 million, providing some comfort to banks considering whether it should provide a loan.
Still, a leveraged buyout for Twitter could be the biggest of all time, potentially requiring several buyout firms and other major institutional investors to team up.