Elon Musk: Twitter’s board put up a defense mechanism against his takeover bid.

New York
CNN Business
 — 

Twitter has indicated that it’s not interested in being bought by the world’s richest man without a fight. The social network’s board made a defensive maneuver that could thwart Elon Musk’s takeover bid, but he still has a range of options that suggest this Silicon Valley showdown is likely far from over.

Twitter

(TWTR)’s board said on Friday it was made an offer to acquire all the shares in Twitter

(TWTR) he does not own for $54.20 a piece, valuing the company at around $41 billion. That represents a 38% premium over Twitter

(TWTR)’s closing share price the day before Musk’s large ownership stake was revealed.

The poison pill plan, detailed in a filing with the Securities and Exchange Commission on Monday, will remain in place for nearly a year and will be triggered if Musk (or any other investor) expands his stake in the company to 15%; he currently owns around 9% of shares. It would give all other shareholders the right to buy one additional share for each share they own at a discount. While other shareholders executing their rights to buy new stock under the plan would have to pay $210 for each new share they purchased, Musk (or another hostile investor) would have to pay $420. (Twitter’s team proved Musk isn’t the only one capable of spicing up a serious corporate standoff with marijuana references.)

Now, eyes are back on Musk to see how he might respond to the board’s defensive measure.

“This all now becomes ‘a game of high stakes poker’ between Musk and Twitter’s Board with this upcoming week likely an eventful one as we expect to formally hear from both parties on their next move in this MMA battle for Twitter,” Wedbush analyst Dan Ives said in an investor note Sunday.

With the poison pill making the prospect of a Twitter takeover more challenging for Musk, he could decide to withdraw his bid, sit tight and exercise the still-significant influence he’d have at the company as one of its largest shareholders.

But for Musk — who said just last week that he doesn’t like to lose — that may be an unlikely course of action. Musk said in his acquisition offer letter: “I don’t have confidence in management nor do I believe I can drive the necessary change [at Twitter] in the public market,” and added that he might reconsider his position as a shareholder if the board rejects his offer.

Musk said in an interview at the TED conference last week that he has a “Plan B” if his bid falls through, although he declined to elaborate on what it is.

The media and industry experts have been breathlessly following Musk’s Twitter feed for possible clues about his next moves, a testament to the unusual nature of the situation. Some wondered whether his tweet on Saturday with the phrase “love me tender” was a hint that he’s considering circumventing Twitter’s board by offering to buy up shares en masse directly from other shareholders through a tender offer. (Alternatively, he might have just been on an Elvis kick this weekend.)

A tender offer could potentially be another trigger for the poison pill. However, Musk could launch a conditional tender offer, making the sale of the shares contingent on the Twitter board withdrawing the pill, said Ele Klein, partner and head of the M&A and Securities Group at law firm Schulte, Roth & Zabel.

“The theory of that is that if shareholders tender to that condition, he hasn’t violated the poison pill because he’s not closing it … and if enough people tender he can say to the company, ‘Look, I have the shares ready to be given to me, the only reason they can’t is because you, the board, is blocking the will of the shareholders,” Klein said.

Musk could also respond to the poison pill by laying out his financing for the deal and future plans for the company, in an effort to gain support from Twitter’s board for his offer. The poison pill filing states that the plan is meant to “protect stockholders from coercive or otherwise unfair takeover tactics” but would not “interfere with any merger, tender or exchange offer or other business combination approved by the Board.”

“Given Musk’s antics over the years as well as comments at last week’s TED conference, [Wall] Street remains skeptical on this bid and more details need to…