Twitter's Poison Pill defence against Elon Musk Explained (And why a takeover is NOT dead)

[@PreetBanerjee]

NOTE: I deleted the earlier version of this video and updated it with the new details announced a few hours by the board of Twitter after I published it (about the specific Poison Pill plan filed). If you liked the earlier version - I'd appreciate it if you hit the like button on this one too! 😊

[@johnsmith-ir1ne]

Done! I'm a fan of your content, esp for Canadians 🐱 Even tho Elon is the definition of a unstable wildcard, I really hope he succeeds taking over Twitter. Not because I think Elon is really a reliable free speech advocate (he's not, given his history), but because Twitter is proven to be the enemy of free speech and intellectual diversity and academic freedom (given its history). I would say the same to KZbin/Google, Facebook, Reddit...

[@PreetBanerjee]

@@johnsmith-ir1ne Thank you, John!

[@matthieuv.4605]

Ok ok, I thought I was getting crazy for a few moments...

[@LuciferFCS]

thanks for this description, and breaking it down for a dummy such as myself

[@robertjenkins7133]

Guess Twitter read my comment lol.

[@CharmelionZard]

Can’t believe I saw an honest KZbin video with as little bias as possible on the subject being covered. You earned yourself a subscriber.

[@PreetBanerjee]

Thank you! That means a lot

[@theeternal6890]

One more

[@jessie960]

@@PreetBanerjee same here! I love your pacing for the information. It doesn't cram information

[@michel-adrienacadie8898]

Yes another one with Elon buying Twitter

[@burtonrodman]

SOOO refreshing to see a video that just presents the facts in an unbiased and understandable way. Thanks!

[@michelemisiewicz2301]

A friendly takeover is usually when the target Board are going to benefit personally - a hostile takeover is usually when the target Board are not going to benefit personally. It's supposed to be about what benefits the shareholders but .. hmm. I love how this shareholder plan essentially changes the game while it's in process - and the SEC has no problem in allowing it!!! Now I understand why Musk and the SEC do not get along :)

[@sachin265]

Elon called the SEC as "b**tards" in his latest TED interview

[@michelemisiewicz2301]

@@sachin265 He obviously has his reasons :) My position is how can the SEC as unbiased regulator credibly approve the poison pill? It allows ANYONE to buy shares and trigger the 50% discounted buying of shares by all other shareholders EXCEPT Musk. It is protectionist policy - and weighted against Musk - but yet he is also a shareholder - so how is this acting in the best interest of ALL shareholders? It is clearly dishonest and unacceptable ie in breach of their Directors duties. Furthermore, the Board has a conflict of interest - they will retain their paid positions if Musk does not obtain ownership - but will not if he does. Obviously the SEC should not honour the Boards actions - and if it does then I guess Musk is right about them as well!! :)

[@Eternitypraise]

This was an amazing explanation, mate, you are really good at this!!!

[@PreetBanerjee]

Thank you very much!

[@doompod]

As someone who just got permanently suspended from Twitter for making a joke about slapping someone, I hope Elon buys Twitter and cleans house.

[@floridaray3380]

Ssoooo funny that he did buy it (26 April)

[@Nightout88]

well he bought it lets hope he cleans it up now

[@BobRooney290]

Elon got ripped off. twitter aint worth a dime.

[@xehP]

same here, in-fact it was a quote, I sent an appeal and gave them a timestamped video for context and they rejected it lmaooo I'm not even fussed about it personally, but I thought I'd appeal it for principles sake.

[@McD-j5r]

Exactly what he did.

[@blanti]

I first heard you on an AGF Virtual Roadshow. Love your expertise at simply explaining the complicated. Keep up the great content! Also, thanks for the lack of a "Stroke" thumbnail, lol!

[@1mikewalsh]

If I had any stock in Twitter right now I would dump them before Twitter devalues them to $4.00! Elon has offered MORE than a fair price.

[@YOQishere]

Damn I been subbed to you for years, I admit it's been a while since I checked out a video but holy what a difference. Great clean video. Great edit. shout out to you/team editor whoever. very inspiring. And informative.

[@PreetBanerjee]

Thanks for sticking around! And thanks for the great comment: I'm embarrassed to look back at some of my older videos lol

[@cherylhurst]

Pretty sure he does it all himself, no team. It’s incredible isn’t it!!

[@88SRINIVASAN]

One of the best and easy way of explaining the subject, I have seen very few explained such complicated in easy understanding way. And you are one of them. Very satisfied to seen your video, hope I will follow all your future content and expecting to learn more.thanks and keep post more useful informative videos. 👏🏽👏🏽👏🏽👍

[@cherylhurst]

The other comments say it all but preet you are honestly so inspiring in how you explain complex topics and also the quality of the editing and videos. It would probably be so easy for you to make someone like me feel stupid but you don’t, just clear information 😊😍

[@slevinchannel7589]

People really love to HERO-FY the Rich, even though objectively proven and factually in fact: the rich hurt the poor and the current systems makes them hurt us. This aint a Theory: We have the Data. The Data? We have It! C'mon, check channel like 'Second Thought' and 'Some More News' and give them a genuiny chance to explain to you that both 'There is No Problem' AND 'The Problems are so heavy its hopeless!!' is BOTH untrue and wrong and false. We totally have Hope. Give those KZbinrs a FAIR Chance, please.

[@mariemazzibren5040]

*'Thank you, Preet!! We're watching and learning!!'*

[@jenkins80526]

His Twitter purchase is one of Elon's awesome gifts to the world!!!

[@teslacarolina]

Very informative and no BS. Excellent video!

[@PreetBanerjee]

Much appreciated!

[@rachaelwatson4989]

Interesting thanks

[@ahsanmohammed1]

Good topic. Good video. Thanks.

[@aden7824]

Great video Preet! Am I correct to say: Poison pill = More shares to shareholders, purposefully diluting share value to make buying the company outright, less attractive?

[@PreetBanerjee]

Very close: a poison pill defense puts into place the possibility of creating more shares, and that existing shareholders (and NOT the acquirer) would be able to acquire those shares on favourable terms. This would exclude the acquirer from being able to keep their proportional share of control. The poison pill rarely gets triggered (I think I saw somewhere that one has NEVER been triggered). Either a deal is made (either with the board, or with shareholders) which could be a sweeter deal, or a proxy battle to replace the board with a more friendly (to the deal) board.

[@luk1_285]

@@PreetBanerjee wouldn't shunning the acquirer to the same benefits of the poison pill be discriminatory as a shareholder of the company. Is not the acquirer entitled to the poison pill benefits as a shareholder?

[@maccsamillion3158]

Great video!! It’s nice to see unbiased facts and info. Keep up the good work!!

[@PreetBanerjee]

Thank you, Maccs!

[@sa34w]

He can buy 14.20 using 2 proxies, then buy another raise his 15 percent and by that give an option for proxies to double their shares and get a hostile takeover done easily

[@suggesttwo]

The board of directors have not done thier feduciary responsibility to the shareholders. It should be considered.

[@rohitvarkhedkar5038]

Awesome explanation!!

[@s0lidniy]

What's the shareholder motivation for buying those extra shares at $210 when a share trades $50? Wouldn't you be paying ~400% price?

[@PreetBanerjee]

I think that price might be adjusted if they ever get close to needing to trigger the pill. The rights agreement has all sorts of clauses indicating they can change the price anytime for pretty much any reason. Right now, I think it's just symbolic based on the 420 meme which is stupid.

[@BM-su7kc]

I subed for the sole reason that the thumbnail doesn't look like you're having a stroke attack.

[@PreetBanerjee]

Haha - thanks!

[@brandon1910]

Nice balanced video. Thanks!

[@jdavid1707]

fabulous explanation. very entertaining too. congrats on breaking 111k subscribers. how cool is that?

[@PreetBanerjee]

I'll break out the champagne at 420K subscribers? lol

[@joshlock4627]

It’s called free speech . It’s a public company . Don’t like it , work hard and buy shares

[@maryallen6334]

I've just subscribed. Thanks for explaining the poison pill thing so I could understand it. A channel like this "explanations for dummies" is sorely needed.

[@PreetBanerjee]

Thank you Mary!

[@SYLXM]

Fantastic explanation!

[@PreetBanerjee]

Thank you!

[@alyshabates5126]

Chất lượng, Sỹ Luân chắc thích bản Cover này lắm này! Chúc mừng em cùng toàn thể Ekip F. Studio

[@littleninjai222]

Hi, Preet I'm so interested to hear your thoughts on the Twitter deal. If you do another video, can you please talk about what happens to shares when a company goes from publicly traded back to private?

[@truth3137]

What a great video! Liked, subscribed and belled!

[@PreetBanerjee]

Awesome thank you!

[@AndieZ4U2]

I truly am thankful for this explanation.

[@jamespitcher6936]

I think censoring the Babylon Bee's post was the final straw and triggered Elon. It came days after BB censorship.

[@roya8683]

Amazing explanation

[@victoria001av]

A stroke! Ha! Why they do that? I'm subscribing.

[@georgesmith9178]

In this case, it is not just about money. As Preet aptly said, the shareholders own the company. And as that is the case, they can vote on this boards tactics to deter a legitimate bid on obtaining control of the company. Of course, Elon Musk will have to continue to explain why he wants to acquire Twitter because in this case it is political - the board wants to be able to continue to curtail free speech as they please via unannounced algorithms. Put plainly, Twitter is extremely important for democracy and the current board is not exactly democracy-friendly.

[@JD-pe7sx]

As a tiny retail shareholder I resent so many people saying this isn't about the money, lol. It absolutely is. The bid is too low. Twitter was a $70 stock once and can be again. I'd rather wait and I'm sure lots of shareholders would too.

[@sachin265]

What a great and informative video. Loved it.

[@PreetBanerjee]

Glad you enjoyed it!

[@ramblinlamb6459]

Thanks for the clear definition of a "poison pill" Preet. Sounds like the expression "abortion pill" might be even more appropriate ;)

[@theeternal6890]

Why would that be?

[@ramblinlamb6459]

@@theeternal6890 They're more readily available ;)

[@theeternal6890]

@@ramblinlamb6459 hehe.. ok🥲🥲

[@cespinosa565]

Wow...great ... explained so most of us could understand. Impressive 👍🏼!!!. You got a new subscriber and follower.

[@PreetBanerjee]

Thanks and welcome!

[@wraith9448]

Well he bought Twitter

[@braythirteen]

This is a very well done piece of content. Thank you for sharing!

[@PreetBanerjee]

Thank you Billy!

[@sonicbigboom]

Thank you for clearly explaining how this poison pill may work. My only question is, where do "preferred shares" come from? I have always thought stocks were the company's ownership split into many different parts. So how do these "preferred shares" that have the potential voting power of ~40% of the company form?

[@PreetBanerjee]

A company can create stock at the board’s discretion, really. Normally a preferred share is like a pseudo bond, paying a nice dividend and not having voting rights, but the board has set it up that these new shares would have voting rights as part of the design of the poison pill plan.

[@PreetBanerjee]

Shareholders (and the markets) might end up not being happy about the board’s decisions though.

[@sonicbigboom]

@@PreetBanerjee To clarify, does that mean that with enough of the company’s support, (board/51% of stocks), stocks can be made out of thin air?

[@StofStuiver]

@@sonicbigboom As far as i know a company can issue new shares to get more liquidity. So the money that comes into the company from the sale of new shares, goes into the company, which raises the value of the company and thus the shares. So if done normally, to get liquidity the share price would not go down. Ofc if it is to save a company bc it cant pay its bills, thats less good. And in this case, im kinda baffled, bc it seems to me, if the acuirer cant buy, his shares become worth less, so its seems theft to me. But im no expert, so maybe im wrong

[@biggoofer]

Best explanation on poison pill with Twitter example

[@hamboverse]

Well this is very informative

[@r0yal_]

how is it allowed for them to specifically lock someone out of buying shares if they already own 15%, that doesn't seem fair to me

[@Virtualvinyilradio]

I watched the whole thing 👀

[@user-km4ys1js1t]

I wasn't planning on liking the video, but I sure do hate those thumbnails, so u get a like

[@CodeDreamer68]

Well done. Thanks for putting this piece together.

[@PreetBanerjee]

My pleasure!

[@billgarner9352]

Wow, excellent video! Thanks very much.

[@PreetBanerjee]

Glad you liked it!

[@stealtime]

This was really good! Thanks, Preet

[@HD-wf3bp]

I didn't know anything about this and now I do. Thanks for making this video!

[@PreetBanerjee]

Happy to help!

[@leonguyen1288]

At this rate elon is gunna make his own twitter like how he saw rockets being to expensive and made his own

[@suegoetz1221]

Very good explanation for a newbie like me. Bhalo.

[@PreetBanerjee]

Thanks and welcome

[@lakshmikanthrlakshmikanth3548]

In 10 seconds... I hit the subscribe button.

[@woodtv4481]

NEWEST SUBSCRIBER! IDOL!

[@MrMoffett82]

always look forward to your videos, great job at teaching a newbie

[@PreetBanerjee]

Thanks, Michael!

[@celestemichon1038]

Thank you that was really interesting and informative yay Elon

[@jamesdriscoll2478]

Well put together video thank you I appreciate it subscribed and gave a thumbs up. I don't see how they can actually offer more shares to the general public without giving him more shares also that seems to be some kind of illegal action . But again love the video very impressive all the way around thank you

[@PLAYA3ULL_GAMES]

Great video - well done. Thank you.

[@PreetBanerjee]

Glad you enjoyed it!

[@DaSnipy]

Smooth .. especially because you added a numerical example .. 👍 and yes, you do somewhat look like Johnny English ! 😎

[@PreetBanerjee]

The more I look at Rowan Atkinson photos, the more I'm starting to see it!

[@Enemji]

Did the Twitter shareholders exercise their rights to buy additional shares?

[@dalendru]

Really well done. For a non-finance guy, this was very helpful. Very nicely presented. Subscription earned.

[@PreetBanerjee]

Thank you! Appreciated!

[@dennishilmas3423]

Ok, so, from 97-01, how many companies used it? If 21 companies used it; cool....., if 5,000 companies used it; not cool. What are the numbers from that timeframe?

[@PreetBanerjee]

Don't have the aggregate numbers, but from that article in CFO magazine they said 140 companies used it in the first half of 2001. Keep in mind, this was as the tech bubble was bursting and lots of companies became targets for takeovers, so that's likely an inflated number compared to the prior years.

[@andrewwoulfe6579]

The shows I really don’t understand finances to be able to selectively say who can buy shares seems weird Also sounds a lot like our government when we’re in trouble will just print more money or when we’re in trouble will just make more shares

[@tateknows1688]

lets all buy shares and give our voting rights to elon musk

[@sk.n.9302]

Thanks for a great explanation!

[@PreetBanerjee]

You are welcome!

[@ogslowdragon]

Fiduciary irresponsibility or internal sabotage of the stock are the only two acceptable critiques.

[@hisskias330]

Don't u think , you deserve million subscribers? Seriously shocked to see 1L subscribers for such a good content.

[@PreetBanerjee]

Hopefully if I keep grinding I’ll earn that! I appreciate your support!

[@gilgamesh310]

Is it good for retail investors to invest now, so that our shares increase in value when Elon buys?

[@PreetBanerjee]

If the current share price is below the takeover offer price that tends to signal that the markets are skeptical the deal will complete. That may change, but you would be speculating that the deal would happen. The bigger the discount to the offer price, the higher the return would be, but the risk is higher too. If the deal falls through, the share price could drop. So: nothing is certain.

[@deejaypile]

AWESOME KZbinR!

[@memnocktdevil]

Actually (this is of no consequence now but) reconsider his shareholder statement was a threat. The share price blew up because people found out he was buying. He was saying if i sold now the stock would tank and you all would take the blame

[@Vaishnavnairajith]

Great video Preet.

[@PreetBanerjee]

Thank you Vaishnav!

[@PeterPapolis]

Preet, can you walk me through in detail why the 1/1000 of a preferred share is worth $420 in the end? I really don't understand that point. I am financially literate, and I was with you up to that point. I understand how a shareholder has the right to pay $210 for the 1/1000 of a preferred share, but then you lost me after that.

[@PreetBanerjee]

Yes, it's a bit puzzling but the devil is in the details. If you look through the 50+ pages in the shareholder rights plan, there are tonnes of clauses that say they can change the exercise price pretty much arbitrarily whenever they want. So my guess is that they chose $210/$420 as a symbolic number and would adjust the price if necessary if anyone crosses the 15% threshold. They might choose a number that makes more financial sense, but given that apparently no poison pill has ever been triggered in history, the numbers don't matter - just the existence of the plan.

[@georgedoolittle9015]

"come up with $210 for promises or tender Elon at his current offer now and get paid now." In theory Elon has the cash and possibly leverage of the Board to convince Jack Dorsey by way of example to support the bid.

[@MrRight-wm5rv]

You earned a sub

[@xoxjelloxox]

How do you view shares bought by people?

[@yernimertski1605]

the closing statement got my like!!

[@shawnhennigan7170]

Please Elon Musk buy AMC stock

[@muraliv80]

Well done - well explained

[@PreetBanerjee]

Thank you, Murali

[@evelimdelacruzalejandrotal7959]

Very smart Elon. He knows what he want and what will be.

[@davidchen1458]

Why ppl spend 210 to buy a equivalent common share where it trades at 50?

[@shawnhennigan7170]

Elon Musk please oh God buy AMC stock to help this squeeze

[@its.yogeshpatel]

Very well explained. But got confused - How company is offering more shares when it has already offered it's all shares? I mean once a company is made public with its 100% equity given to share holders, where are these new shares coming from?

[@kurokeme87]

From thin air

[@HurtsEnd]

He bought it

[@DERIC4REAL328]

Musk is a fitting name cause something stinks with elon!

[@ronproietti6050]

Go Elon Go !!!!!

[@SoultimacysPublicationHouseEtc]

Interestingly

[@thunster816]

If Twitter did their job people wouldn't of wanted Elon to buy Twitter. Elon wouldn't be talking shit about Twitter etc. Why add in new features when you know you should be fixing what people want you to fix etc.

[@_MrLee]

I hope Elon isn't setup to be physically poisoned IRL.

[@SimbolicProductions]

is this guy Chamath?

[@delishdida]

What happens if someone other than Elon hits that 15%. Then will the poison Pill be activated and will it restrict Elon or the new guy who hit 15%.

[@nakulkashyap5205]

How did they arrive @ 210 per 1/1000 class A share? Is there a relation to the present share price

[@PreetBanerjee]

There isn’t. They chose an exercise price of $210 because the exercise price is designed as 50% of what the market price they select - which would make it $420 which was chosen because of the 420 meme. They will most likely change the exercise price if they ever get close to needing to trigger the pill as $420 doesn’t really make sense and the rights plan lets them change those terms at will.

[@alveolate]

so the price they set is purely meme? are they trying to signal to shareholders that they can also meme just as good as musk so don't sell to musk, trust them instead?

[@harrypotter9213]

So the 1/1000 preferred shares, which cost $210, are basically equal to the common shares, which Elon buys and costs $50? So they're like a costly way of maintaining ownership percentage?

[@PreetBanerjee]

The pricing they chose was a little outside the normal range for poison pills (which roughly is 3x-5x the current price from what I can see), but it almost seems as though the price is irrelevant as the existence of the plan (which allows for a changing of the exercise price) is the deterrent that allows for the board to buy more time to weight their options. It generally either brings the acquirer to the table, or could force them to walk away or go around the board and try for a proxy vote to remove the board and replace it with directors who would approve the original deal.

[@harrypotter9213]

@@PreetBanerjee Assuming they then took the poison pill, would the company's overall price increase for the acquirer? Assuming they wanted to buy 100% of the company would they need to purchase the preferred shares as well and would those shares cost $210? or would taking the poison pill basically make the company "unbuyable" because the preferred shares are off-limits for the acquirer?

[@PreetBanerjee]

@@harrypotter9213 I believe a poison pill has never been triggered before, so it’s untested. I imagine the shareholders can sell their preferreds to anyone they want (I believe the acquirer is only prevented from getting the rights which are exercisable at half the pref share price), so this would make the acquisition much more expensive as they would have to make up for their diluted position and then continue to buy more shares as well.

[@billsmith6652]

Is this actually legal or just never been challenged in court? One would think the equal protection clause of the constitution would prevent treating one shareholder different than all the others and would be deemed illegal. Particularly, when the board collectively owns less than 2% of outstanding shares.

[@PreetBanerjee]

Poison pills CAN be ok from a court’s perspective as many have been tested in courts. However, I believe there was a recent case that was deemed against a corporation’s best interests (I believe that board had tried a 5% trigger and the court thought it was too extreme).

[@陶德本]

i am confused by the 1/1000 preferred share, does this means that if i own 1 common share and i will have to spend 210 in addition, or otherwise i might lose money because the stock price will drop after the plan?

[@zholud]

So if 1/1000 of a preferred share is bought at $210 and is valued at $420, where does $210 come from? If I am a shareholder it is not in my best interest for the board of directors to do this because my share value should drop (right?). Say I own 1 twitter share - how do I defend my interests if I am against the poison pill?

[@craffte]

Loved.(Liked. Subbed.)

[@PreetBanerjee]

Thank you - I appreciate it!

[@DirtyDeedsLLC]

That last comment about stroke pics got me to like and subscribe 🤣

[@lnk3503]

It looks like twitter is about to get replaced.

[@japjiobhan1687]

Ok so I’m no financial expert or anything of the sort. Just a senior in hs who’s known for his observations. So I COULD BE WRONG but I think that if the board doesn’t take Elon up on his offer, he’d dump majority of his share cashing in all the profits and bringing the stock price down. And then when the shareholders finally remove the current board members he’d start buying up shares at a heavily discounted rate and make another offer, which the then board members MIGHT accept, making him the owner and taking the company private OR He could propose another offer while the prices are down and the board being ‘scared’ of the shareholders could accept the offer making him the owner. Now idk if this would against the rules but if it isn’t it’s one of the ways Musk COULD go.

[@PreetBanerjee]

Interesting theories - I imagine that if things stall a bit for now and he ends up selling his stake I could definitely see a scenario where the price drops. That might bring out more suitors to the mix. This could drag on for a long time!

[@takeoffeh9576]

Just wondering, if elon has multiple like minded investors already invested in twitter and he triggers the "poison pill". Couldnt they just purchase the new stocks and sell back to elon for a small return on investment?

[@PreetBanerjee]

It might be easier to just go around the board and have a proxy battle, get the board replaced with one that will approve the deal. The other investors would still get their premium. I don't know if he'll get that much support from institutional investors, but triggering the pill would be problematic for Musk, and historically I don't believe anyone has ever tried that.

[@planeteuropa]

Mid term elections ..! Hope Elon can take over soon and throw out the corrupt board.