Lobster Trap

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Lobster Trap

An antitakeover strategy in which a publicly-traded company prohibits some convertible security holders from voting in the event that they exercise the conversion option. Specifically, if a single shareholder has more than 10% of the company's equity in convertible securities of any kind, that shareholder will be disallowed from converting their securities into voting stock. The conversion option may still allow the holder to own and have all other rights associated with common stock, but voting is not permitted. A lobster trap must be incorporated into the company's charter.