Question

What is a "poison pill" in the US? (also called "shareholders' rights plan). How does it work? Why does it render the acquisition of further shares in a target company, fruitless or impossibly expensive?

Thanks!!

Answer 1

A poison pill is a defense tactic utilized by a target company to prevent or discourage hostile takeover attempts. Poison pills allow existing shareholders the right to purchase additional shares at a discount, effectively diluting the ownership interest of a new, hostile party.A poison pill is a defense tactic utilized by a target company to prevent or discourage hostile takeover attempts. Poison pills allow existing shareholders the right to purchase additional shares at a discount, effectively diluting the ownership interest of a new, hostile party.