Poison Pill Clauses Actually Help Shareholders

from the maybe-not-so-bad dept

For a while so-called “poison pill” clauses in company bylaws, which help to prevent hostile takeovers of companies by letting shareholders buy up additional share at an extreme discount in the event of a hostile takeover attempt, have gotten a bad reputation. Most people see them as ways for management to unfairly protect themselves from a potential buyer – which could go against the interest of shareholders. However, a new study says that poison pills actually help shareholders, since they usually lead to a higher negotiated selling price that everyone is happy with. The shareholders get more money for their existing shares and the buying company still gets the company they wanted (though, at a higher price). I’m not sure I completely agree, since I think that poison pills are easy to abuse, but it’s good to see some actual studies on the matter.

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