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Poison Pill
Term category: General Business
In 10 words or less: A strategy that companies apply when they're the targets of hostile takeovers.

Definition: A poison pill is a way to make a company less attractive to a hostile buyer.  This prevents hostile takeovers and changes in management.

Advice: Common types of poison pills include the following:

1.) The right for existing shareholders to buy shares at a discount (dilutes the acquirer)
2.) Granting more voting rights to existing shareholders.
3.) Companies may issue lots of debt or preferred stock to make themselves less attractive.

 

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