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Interests of the shareholders of twitter

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Earlier this year Elon Musk, the CEO of Tesla, made an offer to buy Twitter. After this offer was made the board of directors of Twitter initially opposed the bid from Mr. Musk and adopted a "poison pill", a change in the firm's rules that made it much more difficult for Mr. Musk to buy Twitter.

(a) Why might such a step be in the interest of the board of directors but not in the interests of the shareholders of Twitter? Give an explanation.

(b) If the board of directors is the agent and the shareholders of Twitter are the principal, does this indicate that there is a principal-agent problem when a bid is made to buy a company? EXPLAIN.

(Eventually the board of directors of Twitter did not enforce the "poison pill" rule and they decided to accept Mr. Musk's bid for Twitter).

Reference no: EM133203185

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