Searched and didn’t get much help. Can somebody explain exactly how these work? In a hostile takeover if you are using the flip-in pill it give the shareholders of the target the right to buy more shares of the target at a substantial discount. So what. Wouldn’t the Aquirer just alter the exchage ratio that they were offering if it was a security deal or is that fixed upon the tender offer? If it was a cash deal I dont see how this helps either. The books mention dilution, but I don’t get it. Help please.
May help or may not… A strategy used by corporations to discourage a hostile takeover by another company. The target company attempts to make its stock less attractive to the acquirer. There are two types of poison pills: A “flip-in” allows existing shareholders (except the acquirer) to buy more shares at a discount. By purchasing more shares cheaply (flip-in), investors get instant profits and, more importantly, they dilute the shares held by the competitors. As a result, the competitor’s takeover attempt is made more difficult and expensive. An example of a flip-over is when shareholders have the right to purchase stock of the acquirer on a 2-for-1 basis in any subsequent merger.
Hi mwvt9. If I remember correctly the book mention dilution in acquirer’s holdings because when posion pill is triggered acquirer is prohibited from buying additional shares at dicounted prices unlike other shareholders of taget co. Poison pill is the legal right to BOD to make the takeover more difficult and expensive for acquirer. This right is exercised by board when specific shareholding exceeds beyond certain limit.
i guess…if the (existing )shareholders have the right to buy the target cos shares at a discount, and they exercise this right, then there is more free float in the market. This additional shares would mean that the acquiring co. needs a ’ % ’ of the number new shares as well, to reach the target percentile for the takeover, making the takeover process more difficult
is it possible if the acquirer secretly buy all the shares in the open market first, and then annouce the take over? the poison pill won’t be so bad to them can microsoft just buy all the shares in yahoo in open market now? they dont even need to annouce the takeover until the buy like over 50% of their shares, then yahoo dont even hve a say not to sell it to microsoft?? i dont know
you have to file a form (think 13d?) when you take a position exceeding a certain percentage.
Just a random question based on monki’s post. If a company set up various unconsolidated SPVs to buy shares of a target in the open market before announcement, it would be easy for the SEC to uncover correct?
Niblita, I can’t help with your question, but thanks to everybody who responded. I understand it now.
sounds like enron…
Niblita75 Wrote: ------------------------------------------------------- > Just a random question based on monki’s post. If a > company set up various unconsolidated SPVs to buy > shares of a target in the open market before > announcement, it would be easy for the SEC to > uncover correct? It’s called stock-parking - it’s illegal, a serious violation of standard 1A, what Ivan Boesky went to jail for (among other things), can be pretty easily uncovered by the SEC, and is otherwise a really terrible idea. Nobody here ever do this.
Thanks JoeyD for answering. I’ll look him up and read the whole story.
If you want the whole story, the book Den of Thieves is a fun read (if a bit dated now).