Elon Musk decided to take over Twitter. Twitter has 100 million stocks outstanding with a current price of $30 per share. Musk is offering $35 per share. 1. Why is the price Musk is offering to Twitter's shareholders higher than the current market price? 2. The press suggested that this is a hostile takeover. Explain the main difference between hostile and friendly takeovers. Currently, Musk holds 15% of the stocks in Twitter. The board of the company decided to activate a poison pill. According to the poison pill provisions, the company will have a 2:1 rights issue (that is for every old share you can buy two new shares) except for Elon Musk, with a subscription price of $20. Assume Musk decided to buy another 1% of the shares at the price of $35 and triggered the poison pill. 3. Calculate: i. The new price of Twitter after the activation of the poison pill ii. The effect of the poison pill on the voting rights of Elon Musk iii. The effect of the poison pill on the wealth of Elon Musk 4. Assume now that because of the threat of the poison pill Musk decided not to buy Twitter (that is ignore the previous question). Do you think Musk's announcement that he is withdrawing his bid will cause the price of Twitter to fall back to $30? 5. Now assume that instead of threatening to activate a poison pill Twitter's management approached Facebook and ask its management to counter Elon Musk's bid. a) What is this defence mechanism known as? Elon Musk decided to take over Twitter. Twitter has 100 million stocks outstanding with a current price of $30 per share. Musk is offering $35 per share. 1. Why is the price Musk is offering to Twitter's shareholders higher than the current market price? 2. The press suggested that this is a hostile takeover. Explain the main difference between hostile and friendly takeovers. Currently, Musk holds 15% of the stocks in Twitter. The board of the company decided to activate a poison pill. According to the poison pill provisions, the company will have a 2:1 rights issue (that is for every old share you can buy two new shares) except for Elon Musk, with a subscription price of $20. Assume Musk decided to buy another 1% of the shares at the price of $35 and triggered the poison pill. 3. Calculate: i. The new price of Twitter after the activation of the poison pill ii. The effect of the poison pill on the voting rights of Elon Musk iii. The effect of the poison pill on the wealth of Elon Musk 4. Assume now that because of the threat of the poison pill Musk decided not to buy Twitter (that is ignore the previous question). Do you think Musk's announcement that he is withdrawing his bid will cause the price of Twitter to fall back to $30? 5. Now assume that instead of threatening to activate a poison pill Twitter's management approached Facebook and ask its management to counter Elon Musk's bid. a) What is this defence mechanism known as
