The policy allows existing shareholders to purchase additional shares at a discount, and it lasts for a year, enough to stop Musk.
Elon Musk, chief executive officer of Tesla Inc and SpaceX, offered to buy Twitter, saying it needed to be "transformed as a private company."
Twitter Inc. adopted a measure that would protect it from hostile acquisition bids in an attempt to thwart billionaire Elon Musk's unwelcome offer to take the company private and make it a bastion of free speech.
The board set up a shareholder rights plan, exercisable if a party acquires 15% of the stock without prior approval, lasting for one year only. The plan seeks to ensure that anyone taking control of Twitter through open market accumulation pays all shareholders an appropriate control premium, according to a statement on Friday.
According to a person familiar with the matter, Twitter enacted the plan to buy time. However, the board wants to be able to analyze any deal and may still accept it.
"The Rights Plan does not prevent the Board from engaging with parties or accepting an acquisition proposal if the Board believes that it is in the best interests of Twitter and its shareholders," the company said.
On Thursday, the Tesla Inc. chief executive officer offered $54.20 a share in cash for Twitter, valuing the social media company at $43 billion. Musk, who said it was his "best and final" offer, had already accrued a stake of more than 9% in Twitter since earlier this year.
Twitter's board met Thursday to review Musk's proposal to determine if it was in the best interest of the company and all of its shareholders.
A poison pill defense strategy allows existing shareholders the right to purchase additional shares at a discount, effectively weakening the ownership interest of any one party. Poison pills are common among companies under fire from activist investors or in hostile takeover situations.
Under Twitter's plan, each right will entitle its holder to purchase additional shares of common stock with a then-current market value of twice the exercise price of the right at the then-current exercise price.