During the first few months of the year, Musk quietly bought up a lot of stock.
He now owns 9% of the company's stock, and he is vying for the other 91% as well. He offered $43 billion for the remaining shares in a letter to the board chairman.
In a filing with the US Securities and Exchange Commission, the board embraced a so-called "poison pill" defense, formally known as a "shareholder rights agreement."
Public companies use the concept to avoid being acquired against their will, and it works by making the target company more expensive. Current shareholders of the company can get new shares that are worth double the price they cost.
The result is more discounted shares flooding the market.
He said that the poison pill filing marked the end of the friendly takeover process.
Formally, hostile takeovers begin when negotiations break down between an acquirer and a publicly held company.
One recent example of a friendly takeover, albeit one that is still going through the regulatory approval process, is Microsoft's $69 billion acquisition of Activision.
The situation played out differently in the case of Musk.
Musk initially accepted the appointment to the board of directors, but then walked back his acceptance days later. Musk made a $43 billion offer to buy the company a few days later.
Musk declared the offer to be his "best and final" offer in a letter to Taylor.
I am not playing a game of back-and-forth. Musk wrote to Taylor that he had moved straight to the end.
Musk responded to this week by filing for a shareholder's rights agreement, which he confirmed in a regulatory filing on Thursday.
Musk can use a classic hostile takeover tactic known as a "tender offer" if he proves that he has the capital to afford it.
Musk can appeal to shareholders directly by offering them cash for their stock at a higher price than it is currently worth, instead of dealing with the board. In the past few days, he has teased about using a tender offer.
—Elon Musk (@elonmusk) April 20, 2022
Musk has a number of tactics he could use if that doesn't work.
He could buy the rest of the shares that go up for sale over time, eventually amassing enough to either become the majority shareholder (over 50%) or to become a large enough shareholder that he can make changes to the board.
That, and variations, is known as acreeping tender offer.
Another option is for Musk to team up with other shareholders to replace the current board with people who are friendly to his takeover bid.
proxy fight is a tactic that allows investors in a public company to use collective action to force a company's board to do something.
Musk appears to have chosen a tender offer as his weapon of choice in his hostile takeover attempt. His initial offer to the board was just shy of $6 higher than the $48 per share that the company was trading at as of Friday afternoon. It is not clear if that offer will change if Musk appeals directly to the shareholders.
Ben Gilbert, senior correspondent for Insider, can be reached via email at bgilbert@insider.com. Sources can be kept anonymous. You can use a non-work device to reach out. Please only email PR pitches.
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