See: Poison Pill.
A poison pill may sound like something a spy keeps sewn into their shirt collar in case they get captured. But, in this case, it relates to a method to avoid unwanted corporate takeovers. It's like the mace of the M&A world.
The term "poison pill" refers to diverse array of strategies meant to prevent a hostile takeover from taking place. Another company starts eyeing your firm, making unwanted offers. You try to say "no," but they just cut you and the rest of management out of the loop. They are going directly to shareholders. Things just got...hostile.
The voting poison pill plan represents a particular structure of defense. It's meant to dilute the stake the hostile company has acquired. It works by distributing shares with super voting privileges to your other shareholders (not the company trying to take you over...their shares don't get the extra voting power). Even though the company attempting the takeover has acquired a large number of shares, they only have a large economic interest in your company. The super voting rights you distributed to everyone else puts the hostile bidder out in the cold when it comes to making company decisions.
All of the other shareholders can outvote them, keeping them from gaining control of the company.
Related or Semi-related Video
Finance: What is a proxy?8 Views
Finance a la Shmoop. What is a proxy? Well it's kind of an approx-i-mate. As in, it's
not exactly the way dogs mate. Not all of them try to text their goodies to each
other. In the land of Finance, a proxy is simply a substitute.
Someone's vote, for example, can be given to another party, who then acts on behalf
of the person, who was going to vote in the first place. But really couldn't care [coffee drive-thru]
less about the outcome, so she went to Dunkin Donuts instead. That's how
most votes are taken in public companies. Proxies are sent out to shareholders, who
then designate their wishes, to then be submitted to an individual, physically
present at the vote, who then you know votes and that's it.
We'll leave you with final warning. Beware of any incoming texts you may get
from a German Shepherd. [Phone with dog text]
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