Poison Pill
A method of defense, used by target company to avoid hostile take-over by other company. Primary goal is to make stocks less attractive to acquire company.
One method of poison pill is a new issuance of preferred stocks which allows existing stockholders to buy new shares with minimum price. Therefore, equity will be more diluted and harder and more expensive for acquirer to buy them.
This method is known as “flip in”.
The other method is to allow existing shareholders to purchase acquirer stocks after the merger.
This method is known as “flip over”.
| Related Terms: Suicide Pill Jonestown Defense |
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