<p>Even if Twitter’s board rejects Elon Musk’s proposal to buy the company, Musk could still target stockholders by either seeking proxy votes or purchasing their shares in a so-called “hostile takeover,&#8221; thus taking over the company.</p>
<p>A hostile takeover occurs when an outside entity tries to take over a company without the management’s consent.</p>
<p>On Thursday morning, Musk tendered an offer of $54.20 per share; the current market price of Twitter is $45.85 per share. Musk could make that offer directly to shareholders if Twitter&#8217;s board rejects the offer. “Investopedia notes that shareholders often accept the tender offer when it is a &#8216;sufficient premium to market value or if they are unhappy with current management,” <a href="https://www.dailymail.co.uk/news/article-10718605/How-Elon-Musk-buy-Twitter-offering-shareholders-generous-price-stock.html">the Daily Mail</a> noted.</p>
<p>Another avenue Musk could take: encouraging stockholders to urge other stockholders to let them use their proxy votes, then, having gathered enough proxies, having them vote to accept Musk’s offer.</p>
<p>But Twitter could conceivably respond by issuing blank check preferred stock to defend itself from a hostile takeover.</p>
<p>Investopedia <a href="https://www.investopedia.com/terms/b/blankcheckpreferred.asp">explains</a>:</p>
<blockquote><p><em>Blank check preferred stock is a method companies use to simplify the process of creating new classes of <a href="https://www.investopedia.com/terms/p/preferredstock.asp" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="1">preferred stock</a> and to raise additional funds from <a href="https://www.investopedia.com/terms/s/sophisticatedinvestor.asp" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="2">sophisticated investors</a> without obtaining separate shareholder approval. In effect, a company&#8217;s shareholders pre-approve the new class to be issued at some point in the future, and then the firm&#8217;s <a href="https://www.investopedia.com/terms/b/boardofdirectors.asp" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="3">board of directors</a> (BoD) has broad discretion in when and how to issue them. This kind of stock can also be created by a public company as a takeover defense in the event of a <a href="https://www.investopedia.com/terms/h/hostile-bid.asp" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="1">hostile bid</a> for the company.</em></p></blockquote>
<p>“To do issue blank check preferred stock, a company must amend its <a href="https://www.investopedia.com/terms/a/articlesofincorporation.asp">articles of incorporation</a> to create a new class of unissued shares of preferred stock whose terms and conditions may be expressly determined by the company&#8217;s board of directors,” Investopedia adds.</p>
<p>“Twitter doesn’t have the dual-share classes that many public tech companies (Meta, Alphabet, Snap) do,” <a href="https://www.forbes.com/sites/abrambrown/2022/04/11/elon-musk-is-poised-for-a-hostile-takeover-against-twitter/?sh=7b279ace74be">Forbes</a> noted. “Those systems leave voting rights—control—with a company’s founders, protecting them against a Musk. Without this, Twitter could adopt a so-called poison pill plan, a costly move where it sells stock at a discount to dilute an aggressive shareholder’s stake.”</p>
<p>Analyst Dan Ives told <a href="https://www.washingtonpost.com/technology/2022/04/14/elon-musk-twitter-takeover-bid/">The Washington Post</a>, “The next step will be Twitter’s Board officially reviewing the Musk filing/letter and then it’s get-out-the-popcorn time as we expect many twists and turns in the weeks ahead as Twitter and Musk walk down this marriage path.”</p>
<p>According to an <a href="https://www.sec.gov/Archives/edgar/data/1418091/000110465922045641/tm2212748d1_sc13da.htm">SEC filing</a> submitted Wednesday evening, Musk told Twitter Chairman Bret Taylor:</p>
<blockquote><p><em>I am offering to buy 100% of Twitter for $54.20 per share in cash, a 54% premium over the day before I began investing in Twitter and a 38% premium over the day before my investment was publicly announced. My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder. </em><em>Twitter has extraordinary potential. I will unlock it.</em></p></blockquote>

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‘It’s Get-Out-The-Popcorn Time’: Musk Could Buy Twitter Even If His Offer Is Refused. Here’s How.