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Claim: Twitter’s Board Could Be Sued After Refusing To Allow Shareholder Vote on Elon Musk’s Buyout Offer

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OPINION: This article may contain commentary which reflects the author's opinion.


Twitter’s board of directors reportedly refused to allow the company’s shareholders to vote on SpaceX and Tesla founder Elon Musk’s buyout offer last week, which, if true, could set the company up for a lawsuit, observers noted on Friday.

“The Twitter board is *refusing* to allow the shareholders of the company vote Yes or No on Elon’s offer,” Human Events editor-in-chief Jack Posobiec reported on Twitter.

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“Twitter must allow the shareholders to vote on Elon’s offer! Democracy!” he added in a follow-on tweet.

Twitter’s board is now in breach of their fiduciary duty and as one of their largest shareholders, @elonmusk can and should sue them. And every other shareholder. Titanic liability,” Posobiec wrote in another post.

On Thursday, Musk offered $54.20 per share in cash, which represents a 54 percent premium over the Jan. 28 closing price.

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Bloomberg News reported:

Musk, 50, announced the offer in a filing with the U.S. Securities and Exchange Commission on Thursday. The billionaire, who also controls Tesla Inc., first disclosed a stake of about 9% on April 4. Tesla shares fell about 1.5% in pre-market trading on the news. 

The executive is one of Twitter’s most-watched firebrands, often tweeting out memes and taunts to @elonmusk’s more than 80 million followers. He has been outspoken about changes he’d like to consider imposing at the social media platform, and the company offered him a seat on the board following the announcement of his stake, which made him the largest individual shareholder.

After his initial stake became public, Musk immediately began appealing to fellow users about prospective moves, from turning Twitter’s San Francisco headquarters into a homeless shelter and adding an edit button for tweets to granting automatic verification marks to premium users. One tweet suggested Twitter might be dying, given that several celebrities with high numbers of followers rarely tweet. 

Musk’s offer to buy the company came after he purchased nearly 10 percent of the platform’s stock the previous week. Afterward, he was offered a position on the company’s board of directors but he declined to accept it; as a condition of being a board member, he would have been limited in the amount of stock he could purchase.

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In a letter to Twitter Musk said that he believes the company “will neither thrive nor serve [its free speech] societal imperative in its current form. Twitter needs to be transformed as a private company.”

“If the deal doesn’t work, given that I don’t have confidence in management nor do I believe I can drive the necessary change in the public market, I would need to reconsider my position as a shareholder,” he said.

Following his offer, however, the board opted to adopt a strategy to block a potential Musk buyout known as a “poison pill,” which Fox Business explained:

Twitter’s board of directors has unanimously adopted a limited duration shareholder rights plan following Tesla CEO Elon Musk’s $54.20 per share offer to take the social media giant private. 

Under the plan, which is also referred to as a “poison pill”, shareholders’ rights will become exercisable if an entity, person or group acquires beneficial ownership of 15% or more of Twitter’s outstanding common stock in a transaction not approved by the board. 

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In the event that the rights become exercisable, existing Twitter shareholders — except for the person, entity or group triggering the plan — would be entitled to purchase additional shares of common stock at a discount. 

Venture capital investor David Sacks suggested that the board’s action could be improper.

“Instead of accepting Elon’s premium to the share price, Twitter’s board is planning to dilute the company by giving insiders a sweetheart deal. This is a blatant violation of fiduciary duty and should be illegal,” he wrote on Twitter.

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Political strategist Greg Price added: “Twitter’s insiders essentially just decided to screw over their shareholders, crash their stock, and open the company up to massive lawsuits just to prevent Elon Musk from running Twitter in a way that won’t rig elections or censor their political opponents.”

“Even if Elon doesn’t end up buying Twitter, he just exposed the censorship regime in a major way. He’s an outsider who won’t play by their rules and they’ll even deliberately dilute shares (which should be illegal) to continue their campaign of mass information control,” Price added.

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