See: Poison Pill.
A poison pill may sound like something a spy keeps sewn into their shirt collar in case they get captured. But, in this case, it relates to a method to avoid unwanted corporate takeovers. It's like the mace of the M&A world.
The term "poison pill" refers to diverse array of strategies meant to prevent a hostile takeover from taking place. Another company starts eyeing your firm, making unwanted offers. You try to say "no," but they just cut you and the rest of management out of the loop. They are going directly to shareholders. Things just got...hostile.
The voting poison pill plan represents a particular structure of defense. It's meant to dilute the stake the hostile company has acquired. It works by distributing shares with super voting privileges to your other shareholders (not the company trying to take you over...their shares don't get the extra voting power). Even though the company attempting the takeover has acquired a large number of shares, they only have a large economic interest in your company. The super voting rights you distributed to everyone else puts the hostile bidder out in the cold when it comes to making company decisions.
All of the other shareholders can outvote them, keeping them from gaining control of the company.
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Finance: What is a poison pill?4 Views
Finance allah shmoop what is a poison pill O romeo
romeo Wherefore out the ac Well if you can't have
me nobody can have me pill lug dead dead alright
that's poison pill allah romeo and juliet and performed by
your friends here and the corporate version Well it isn't
all that different In fact there are really two flavors
of poison pill flintstones chewable lt's called flip ins which
allow current shareholders to buy a ton more shares at
a big discount toe where their shares are currently trading
flippen like if the shares are at forty bucks each
current shareholder than gets allowed to buy five shares for
ten bucks each for each share that they currently own
and have owned for the last in a year About
that would be a flipping well this flip in process
dilutes the company dramatically making it harder for an outside
takeover soldier to come in and you know just buy
the company that's a flip in the non chewable flintstone
flavor that you have to actually swallow is called ah
flip over which comes is a mandate from the board
allowing current shareholders to buy the shares of the acquirer
After the merger at a big discount it basically destroys
enormous value in the combined company making It tastes like
a bitter moth to ah hungry bat so you know
he spits it out The basic idea in these poison
pill defense strategies is to deal with hostile takeovers And
a lot of those came during the junk bond era
in the nineteen eighties when cheap high risk capital was
liquid Lee easily available almost anywhere and companies felt vulnerable
to short term quick buck wall street sharpies who looked
great in a dark suit and usually had awesome hair
So yeah people for details carefully watch wall street the
first one the good one the one with michael douglas
when he still had hair and what you don't really 00:01:54.212 --> [endTime] hear there is he said Shmoop is good yeah
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