poison pill

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Poison pill

Anti-takeover device that gives a prospective acquiree's shareholders the right to buy shares of the firm or shares of anyone who acquires the firm at a deep discount to their fair market value. Named after the cyanide pill that secret government agents are said to be instructed to swallow if capture is imminent.

Poison Pill

An antitakeover measure stipulating that shareholders on the receiving end of a hostile takeover may buy shares in their own company at a price below fair market value. Once the acquisition is complete, the provision allows these same shareholders to buy more shares in the new company for below market value. This forces shareholders in the acquiring company to suffer a devaluation and dilution of their own shares. This is done to discourage hostile takeovers among the shareholders of the acquiring companies. It is important to note that a poison pill need not use both of these tactics; sometimes it utilizes only one or the other.

poison pill

An antitakeover tactic in which warrants are issued to a firm's stockholders, giving them the right to purchase shares of the firm's stock at a bargain price in the event that a suitor hostile to management acquires a stipulated percentage of the firm's stock. The poison pill is intended to make the takeover so expensive that any attempt to take control will be abandoned. See also flip-over pill, Jonestown defense, macaroni defense, suicide pill.

poison pill

see TAKEOVER BID.
Point elasticityclick for a larger image
Fig. 143 Point elasticity.

poison pill

see TAKEOVER BID.
References in periodicals archive ?
Use of poison pills was the commonest mode of suicide.
validity of poison pills was established affected the stock price of
(45) The interplay between these fundamental aspects of corporate law and securities regulation is complex, as evidenced by the law relating to poison pills discussed in the next section.
Supporters have countered that poison pills do provide a benefit by giving the target's board of directors time to put the target up for auction.
(37) Courts have found, in certain cases, that defensive tactics adopted by the board (including failure to redeem poison pills) violate the second prong of this test.
Negative market reactions result when firms adopt antitakeover devices that protect inefficient management, specifically, poison pills. Assuming shareholders adopt antitakeover devices to protect managers who are promoting firm efficiency, it is expected that managers of these firms will be also be practicing good stakeholder management and hence receive higher ratings of corporate social responsibility.
The electronics retailer said in a statement the anti-takeover defense, commonly known as a poison pill, will end May 1, 2005.
Germany outlawed multiple voting rights in 1998, and instead allows companies to use the "poison pill" mechanism as a way of frustrating takeover bids.
During the merger mania of the 1980s, scores of companies instituted poison pills as a way of insulating themselves from hostile aggressors.
The first four of these mechanisms are related to the conditions under which firms would adopt poison pills.