In such a defensive tactic, all Twitter shareholders except Musk can buy more shares at a discount. The move would weaken Twitter shares of Musk, who is the world's richest man, and prevent him from recruiting a majority shareholder to support his actions.
If Musk's Twitter stake grows to 15% or more, the poison pill will start working.
Musk, who earlier this week revealed that he is Twitter's largest individual shareholder, at 9.2%, then offered more than $43 billion, or $54.2 per share, to buy the entire social media company.
Musk's offer is a substantial premium over Twitter's stock price, which is currently just over $45 per share.
When he made the offer, Musk lamented the tech giant's stance on the issue of free speech.
“I believe freedom of speech is a social mandate for a functioning democracy,” Musk said in the filing. “I now realize this company will not thrive or serve that social mandate in its current state.”
Instead of voting on Musk's offer to Twitter shareholders, the company's board on Friday said it would offer shareholders the opportunity to buy more shares at a steep discount, effectively undermining the share price.
The plan “would reduce the possibility of any entity gaining control of Twitter through open market accumulation without paying all shareholders an appropriate control premium,” the company said.
Twitter's board plan will last for one year.
When rumors of a ‘poison pill' move circulated Thursday, Musk speculated on his Twitter account about what would happen.
“If Twitter's current board takes action against the interests of shareholders, they will be violating their fiduciary duty,” he wrote. “The obligations they will assume will thus be enormous.”
Webush Securities analyst Dan Ives told the New York Post that the board's move was a “defensive measure” that shareholders may not find positive.
Edward Rock, a lecturer in law and corporate governance at New York University's law school, has doubts about whether Musk really intends to buy Twitter.