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> The board represents ALL the shareholders, after all. This is the part I don't get. The person who bought 51% of shares is also a shareholder. How come the b

> The board represents ALL the shareholders, after all. This is the part I don't get. The person who bought 51% of shares is also a shareholder. How come the board can discriminate against a single owner like this, just taking away their shares by force. Could they do it to any existing owner if they wanted?

egeozcan 5y ago
As I understand, this happens before anyone acquires 51 percent.
- treeman79 5y ago
  The current board of twitter barely owns any shares. https://www.barrons.com/amp/articles/how-twitter-board-stock-ownership-compares-musk-tesla-51650304124 https://www.barrons.com/amp/articles/how-twitter-board-stock...
- majkinetor 5y ago
  Is it possible to acquire up to 51% in atomic move, so there is no fade in that would make poisoning option too late ?
  - mrkstu 5y ago
    This is the kind of thing the 15% disclosure rule is designed to prevent.
  - tptacek 5y ago
    No.
  - rcoc 5y ago
    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.
jollybean 5y ago
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.
- bigiain 5y ago
  > 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.
  - jollybean 4y ago
    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.
    - smabie 4y ago
      Why do you think Elon is more likely to make the product worse than the current management?
      - 4y ago
emeraldd 5y ago
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.
- colonwqbang 5y ago
  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?
  - SilasX 5y ago
    >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 https://news.ycombinator.com/item?id=31160874
    - tptacek 5y ago
      Poison pills have been settled law in the US for decades.
      - SilasX 5y ago
        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?
      - SilasX 4y ago
xyzzy21 5y ago
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.
tptacek 5y ago
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).
- jmaygarden 5y ago
  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 https://www.lw.com/upload/pubcontent/_pdf/pub2563_1.pdf
  - saalweachter 5y ago
    Do you mean held up or upheld?
    - yuubi 5y ago
      the action held up; the court upheld it.
  - toomuchtodo 4y ago
    Quite an interesting bit of corporate governance history. Thanks for sharing.
jdasdf 5y ago
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.
- lupire 4y ago
  Why do you believe that, against what Twitter board actually said and how other poison pills worked in the past?

egeozcan 5y ago

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

treeman79 5y ago
The current board of twitter barely owns any shares. https://www.barrons.com/amp/articles/how-twitter-board-stock-ownership-compares-musk-tesla-51650304124 https://www.barrons.com/amp/articles/how-twitter-board-stock...
majkinetor 5y ago
Is it possible to acquire up to 51% in atomic move, so there is no fade in that would make poisoning option too late ?
- mrkstu 5y ago
  This is the kind of thing the 15% disclosure rule is designed to prevent.
- tptacek 5y ago
  No.
- rcoc 5y ago
  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.

jollybean 5y ago

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.

bigiain 5y ago
> 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.
- jollybean 4y ago
  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.
  - smabie 4y ago
    Why do you think Elon is more likely to make the product worse than the current management?
    - 4y ago

emeraldd 5y ago

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.

colonwqbang 5y ago
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?
- SilasX 5y ago
  >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 https://news.ycombinator.com/item?id=31160874
  - tptacek 5y ago
    Poison pills have been settled law in the US for decades.
    - SilasX 5y ago
      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?
    - SilasX 4y ago

xyzzy21 5y ago

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.

tptacek 5y ago

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).

jmaygarden 5y ago
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 https://www.lw.com/upload/pubcontent/_pdf/pub2563_1.pdf
- saalweachter 5y ago
  Do you mean held up or upheld?
  - yuubi 5y ago
    the action held up; the court upheld it.
- toomuchtodo 4y ago
  Quite an interesting bit of corporate governance history. Thanks for sharing.

jdasdf 5y ago

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.

lupire 4y ago
Why do you believe that, against what Twitter board actually said and how other poison pills worked in the past?