Twitter Adopts a Poison Pill

The stock market is about flat this morning. One interesting note is that the yield on the 10-year Treasury got as high as 2.87%. That’s the highest yield in more than three years. Bank of America (BAC) reported earnings of 80 cents per share. That was six cents more than estimates.

The latest move in the Elon vs. Twitter game is that Twitter has adopted a “poison pill” defense. That means that Twitter can flood the market with more shares to fight off a hostile takeover. If anyone owns more than 15% of Twitter’s stocks, then shareholders can buy more stock at a discount. It’s possible to fight off a poison pill, but it’s hard. The board voted unanimously for the poison pill.

Musk later tweeted “love me tender” implying he may make a tend off for Twitter’s shares. Interesting move, but if he does that, then he’ll have to release details on how he would finance the deal.

Jack Dorsey said that Twitter’s board is the “dysfunction of the company.” That’s an odd thing to say about a board in which you’re a member, but he has a point. The board owns almost zero shares of Twitter.

The question is how much value would be added if Twitter was more open regarding free speech. I don’t think it would be that much. There’s no getting around the fact that Twitter simply isn’t that profitable.

By the way, the poison pill has an exercise price of $210. That means you can put up $210 and get twice that in shares. Yes, that’s $420.

Also this morning, we learned that homebuilder confidence fell for the fourth month in a row.

Builder confidence in the market for new single-family homes fell 2 points to 77 in April, according to the National Association of Home Builders/Wells Fargo Housing Market Index. Any reading above 50 is considered positive sentiment, but the reading marks the fourth straight month of declines for the index, which stood at 83 in April 2021.

Of the index’s three components, current sales conditions fell 2 points to 85. Buyer traffic dropped 6 points to 60, and sales expectations in the next six months increased 3 points to 73 following a 10-point drop in March.

Posted by on April 18th, 2022 at 10:30 am


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