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.
Related or Semi-related Video
Finance: What is non-voting stock?4 Views
finance a la shmoop- what is non-voting stock? hmm well it's stock that doesn't
vote. bet you're shocked to hear that. most people need a PhD in finance to [stock wears an "I didn't vote" sticker.
understand that notion. but really that's it in most cases common stock carries
with it the right to vote. and in fact it's the common shareholders who elect
the board of directors. but every now and then a potentially hostile investor
comes along and buys or wants to buy a big chunk of stock in a company. well the
amount might be a block large enough to elect that potentially hostile investor
slate or the group of people that investor wants to place on the board to
represent her evil intentions .when that happens companies will often create a
class of common stock similar in every way to its normal common only with its [stock checklist of privileges listed]
voting rights stripped away .that way the investor can own an economic interest in
the company but not monkey with the board.
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