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Finance: What is a poison pill? 4 Views
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Description:
There are two types of "poison pills" - flip-ins, which allow shareholders to buy at a discount, and flip-overs, which allow them to buy shares after a merger.
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Transcript
- 00:00
Finance allah shmoop what is a poison pill O romeo
- 00:08
romeo Wherefore out the ac Well if you can't have
- 00:12
me nobody can have me pill lug dead dead alright
- 00:17
that's poison pill allah romeo and juliet and performed by
- 00:20
your friends here and the corporate version Well it isn't
Full Transcript
- 00:23
all that different In fact there are really two flavors
- 00:25
of poison pill flintstones chewable lt's called flip ins which
- 00:29
allow current shareholders to buy a ton more shares at
- 00:33
a big discount toe where their shares are currently trading
- 00:36
flippen like if the shares are at forty bucks each
- 00:39
current shareholder than gets allowed to buy five shares for
- 00:42
ten bucks each for each share that they currently own
- 00:45
and have owned for the last in a year About
- 00:48
that would be a flipping well this flip in process
- 00:51
dilutes the company dramatically making it harder for an outside
- 00:55
takeover soldier to come in and you know just buy
- 00:57
the company that's a flip in the non chewable flintstone
- 01:01
flavor that you have to actually swallow is called ah
- 01:03
flip over which comes is a mandate from the board
- 01:07
allowing current shareholders to buy the shares of the acquirer
- 01:11
After the merger at a big discount it basically destroys
- 01:14
enormous value in the combined company making It tastes like
- 01:17
a bitter moth to ah hungry bat so you know
- 01:21
he spits it out The basic idea in these poison
- 01:23
pill defense strategies is to deal with hostile takeovers And
- 01:28
a lot of those came during the junk bond era
- 01:30
in the nineteen eighties when cheap high risk capital was
- 01:33
liquid Lee easily available almost anywhere and companies felt vulnerable
- 01:39
to short term quick buck wall street sharpies who looked
- 01:42
great in a dark suit and usually had awesome hair
- 01:45
So yeah people for details carefully watch wall street the
- 01:48
first one the good one the one with michael douglas
- 01:51
when he still had hair and what you don't really 00:01:54.212 --> [endTime] hear there is he said Shmoop is good yeah
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