Q. Which of the following statements explains the Poison pill strategy?

[A] The company will pay the acquirer to go away and stop threatening the company with a hostile takeover.

[B] Company spinning off its most valued asset, in order to make the acquisition less desirable for the acquirer.

[C] Existing shareholders, excluding the acquiring entity, purchase additional shares at a discounted rate.

[D] Company will prevent a hostile takeover by initiating a reverse takeover.

Answer: C
Notes:

Poison Pill is a corporate defense strategy utilized by a target company to prevent or discourage hostile takeover attempts. Under this mechanism, existing shareholders, excluding the acquiring entity purchase additional shares at a discounted rate making it difficult for the acquirer to establish a majority stake in the company.

Source: The Hindu

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