Flip-Over Pill
Categories: Entrepreneur, Company Management, Banking
Our little tech media company, Yay for Games, LLC, is making money hand over fist. “Blastocyst Blast,” the match-three game we created, is taking the world by storm. It’s gonna be bigger than “Candy Crush” and we, the developers, are reaping big financial rewards. Life is good.
But on the horizon, Tech Giant, Inc. lurks, waiting for the perfect moment to acquire our company and absorb us into its own organizational folds. They’ve already made noise about a hostile takeover if we refuse to let them buy us out in a friendly manner.
Luckily for us, we have a flip-over poison pill provision (also just called a flip-over pill, because brevity is cool) in our company’s bylaws, which should make it easier for us to resist their unwanted financial advances. A flip-over pill basically says that, if a takeover is successful, the shareholders of the acquired firm (Yay for Games) can buy shares in the acquiring firm (Tech Giant) at a deep discount. The point of including this provision is to dissuade any would-be hostile acquirers to rethink their plan, since it could end up causing their stock price to drop so much that the takeover wouldn’t be worth it. Either that, or it would force them to negotiate with Yay for Games to find a solution that was more mutually beneficial.
Something important to keep in mind: even if a negotiated acquisition price is reached, the flip-over poison pill must still be swallowed, so to speak. As soon as Tech Giant makes its takeover bid for Yay for Games, the pill plan kicks in, and shareholders have a predetermined amount of time to go get those shares and try to prevent the acquisition.
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