Poison pill
A poison pill is a measure enacted by a corporation to discourage those considering a hostile takeover attack.
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Expanded Definition
Typical poison pills include--
- Interlocking director terms, making it impossible to change the board of directors at a single annual meeting.
- Golden parachutes that require large payments to executives if management changes
- Warrants issued when under attack that allow shareholders to greatly increase the number of outstanding shares
- Macaroni defense. Issuing bonds requiring large cash payments to redeem.
- Pacman defense. Hostile takeover bid against the acquirer.
- Greenmail. A corporate raider is paid cash to go away.
- Scortched earth. Cashing in retained earnings by heavy borrowing and distributing cash as dividends, share repurchase, or major acquisitions.
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