Flip-Over Poison Pill

12/27/24 • 4 min

This tactic, triggered when an acquirer surpasses a specified ownership threshold, allows existing shareholders (excluding the acquirer) to buy shares in the merged company at a discounted price.
A key element is the conversion price, offering a significant reduction compared to the market value. The text uses a hypothetical example involving "Hostile Inc." and "Woke Inc." to illustrate how the strategy could dilute the acquirer's ownership and potentially deter a hostile takeover. The duration of the shareholder's right to purchase shares at the discounted price is also a critical component.

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Previous Episode

Flip-In Poison Pill Strategy

A flip-in poison pill is triggered when an acquirer reaches a predetermined ownership threshold, allowing existing shareholders (excluding the acquirer) to purchase additional shares at a discounted price.
This dilutes the acquirer's stake, making the takeover more expensive and less attractive. The explanation uses the example of Woke Inc. facing a hostile takeover by Hostile Inc. to illustrate how a flip-in poison pill functions.

Next Episode

Greenmail: Corporate Takeovers and Ethical Concerns

Greenmail is a controversial corporate takeover defense where a company buys back its shares from a hostile bidder at a premium to prevent a takeover.
This practice, considered by some to be corporate blackmail, raises ethical concerns because it rewards aggressive behavior, dilutes shareholder value, and protects management.
While not illegal, greenmail's legality can be challenged if it unjustly benefits management or harms shareholders. Ultimately, it presents a complex issue regarding fairness and transparency in corporate governance.