Twitter counters Elon Musk’s attempt at taking over the company with a poison pill

The strategy allows existing shareholders to buy additional shares at a discount and is in place for a year.

A day after billionaire Elon Musk bid $43 billion for Twitter, the company announced it had adopted a two-year shareholder rights plan, often referred to as a “poison pill.”

In the new structure, if a person or group acquires more than 15% of Twitter’s outstanding common stock without the board’s permission, other investors will be allowed to purchase additional shares at a discount.

“The Rights Plan will reduce the likelihood that any entity, person, or group gains control of Twitter through open market accumulation without paying all shareholders an appropriate control premium or without providing the Board sufficient time to make informed judgments and take actions that are in the best interests of shareholders,” the company said in a press release.

According to a Securities and Exchange Commission filing last week, Musk owns more than 9% of Twitter. Musk was planning to join the board of directors shortly after his stake was made public by Twitter’s CEO. But days later, Musk reversed course and decided not to join the board after all.

Twitter’s new move is a common way to fend off a potential hostile takeover by diluting the stake of the entity eying the takeover. Twitter noted that the rights plan would not prevent the board from accepting an acquisition offer if the board deems it in the best interests of the company and its shareholders.