Nose Plugs 4 Less has been run poorly for a decade. It used to be the dominant nosebleed-preventer in the industry. But after years of, uh...leakage…the stock has come all the way down from $100 a share to $20 a share today.
Frustrated investors who bought in at $100 and $80 and $72 and $53 and $45 and $33...have written reams of complaint letters to the board, who just doesn't seem to listen to what is obvious as a fix. They have to fire the CEO and put someone in power who will...stop the bleeding. But they won't. For whatever reason.
So now, these angry shareholders...and yes, they are...Hostile...they get together and openly try to buy the company under a process where they purchase as many shares as they can buy.
And then, finally, when they have a majority ownership in the company, they start electing new board members…ones who actually…listen. Remember that it’s the common shareholders who elect the board...who hires the CEO...who hires…everyone else, pretty much.
And hostile takeovers still happen these days. Here’s one of the juicier ones, and arguably worst wealth destroying deal-passes in history…Microsoft tried to go hostile and buy Yahoo in 2008...And Jerry and the board didn’t listen.
So hostile takeovers are not necessarily bad. They’re only bad for poorly run companies. And even then, the common shareholders who actually own the company eventually get paid. So yeah - the best way to avoid a hostile takeover is, uh… always to plug the leak before it gets to be a problem...
Related or Semi-related Video
Finance: What is a poison pill?4 Views
Finance allah shmoop what is a poison pill O romeo
romeo Wherefore out the ac Well if you can't have
me nobody can have me pill lug dead dead alright
that's poison pill allah romeo and juliet and performed by
your friends here and the corporate version Well it isn't
all that different In fact there are really two flavors
of poison pill flintstones chewable lt's called flip ins which
allow current shareholders to buy a ton more shares at
a big discount toe where their shares are currently trading
flippen like if the shares are at forty bucks each
current shareholder than gets allowed to buy five shares for
ten bucks each for each share that they currently own
and have owned for the last in a year About
that would be a flipping well this flip in process
dilutes the company dramatically making it harder for an outside
takeover soldier to come in and you know just buy
the company that's a flip in the non chewable flintstone
flavor that you have to actually swallow is called ah
flip over which comes is a mandate from the board
allowing current shareholders to buy the shares of the acquirer
After the merger at a big discount it basically destroys
enormous value in the combined company making It tastes like
a bitter moth to ah hungry bat so you know
he spits it out The basic idea in these poison
pill defense strategies is to deal with hostile takeovers And
a lot of those came during the junk bond era
in the nineteen eighties when cheap high risk capital was
liquid Lee easily available almost anywhere and companies felt vulnerable
to short term quick buck wall street sharpies who looked
great in a dark suit and usually had awesome hair
So yeah people for details carefully watch wall street the
first one the good one the one with michael douglas
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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