What Is a ‘Poison Pill’ Defense?

Twitter has unveiled its plan to fight Elon Musk’s bid for the company. A poison pill is a maneuver that typically makes a company less palatable to a potential acquirer by making it more expensive for the acquirer to buy shares of the target company above a certain threshold. The strategy also gives a company more time to evaluate an offer and gives the board leverage in trying to force a direct negotiation with the potential acquisitionr. The pizza chain Papa John’s adopted a poison pill in July 2018 in a rare instance of a company trying to block its founder from taking over. Netflix successfully fended off the billionaire investor Carl Icahn’s takeover bid in November 2012. The company has other options to make the purchase unattractive, though there are exceptions. . . .