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An extreme defensive tactic employed by the management of a target corporation to prevent a hostile takeover. The defensive tactics are so extreme that they typically lead to the destruction of the target corporation. See: Suicide.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
Any antitakeover measure so extreme that it may drive the target company into bankruptcy. For example, a Jonestown defense may stipulate that shareholders in the target company may buy shares in their own company at a price below fair market value in the event of a hostile acquisition. Once the acquisition is complete, the defense may allow these same shareholders to buy more shares in the new company at below market value. This forces shareholders to suffer a devaluation and dilution of their own shares. This is done to discourage hostile takeovers. In essence, a Jonestown defense is identical to a poison pill, except for degree; the term indicates that the target company may intentionally go bankrupt, rather than simply weaken itself. The term takes its name from the Jonestown massacre.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
Defense against a corporate takeover in the form of a poison pill so strong that it threatens the survivability of the target company. The name comes from the mid-1970s Jonestown massacre.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.