Nose Plugs 4 Less has been run poorly for a decade. It used to be the dominant nosebleed-preventer in the industry. But after years of, uh...leakage…the stock has come all the way down from $100 a share to $20 a share today.
Frustrated investors who bought in at $100 and $80 and $72 and $53 and $45 and $33...have written reams of complaint letters to the board, who just doesn't seem to listen to what is obvious as a fix. They have to fire the CEO and put someone in power who will...stop the bleeding. But they won't. For whatever reason.
So now, these angry shareholders...and yes, they are...Hostile...they get together and openly try to buy the company under a process where they purchase as many shares as they can buy.
And then, finally, when they have a majority ownership in the company, they start electing new board members…ones who actually…listen. Remember that it’s the common shareholders who elect the board...who hires the CEO...who hires…everyone else, pretty much.
And hostile takeovers still happen these days. Here’s one of the juicier ones, and arguably worst wealth destroying deal-passes in history…Microsoft tried to go hostile and buy Yahoo in 2008...And Jerry and the board didn’t listen.
So hostile takeovers are not necessarily bad. They’re only bad for poorly run companies. And even then, the common shareholders who actually own the company eventually get paid. So yeah - the best way to avoid a hostile takeover is, uh… always to plug the leak before it gets to be a problem...
Related or Semi-related Video
Finance: What is a Pac Man Defense?21 Views
Finance a la shmoop what is a pacman defense?
[Pacman eating] yeah well wacka wacka to you too...Hostile takeovers are rare in real life not so
rare in pac-man but when they do happen there exists a whole cadre of strategies
behind defending them at least from the company's perspective being taken over
there and pac-man defense is inarguably the best named strategy of all of
them in essence what happens when we'll say an angry competitor let's call him
blinky Inc tries to buy an angrier competitor let's call them inky inc.
well blinky would be buying shares of inky in the open marketplace filing to [Blinky and inky appear]
go past 15% ownership and eventually own enough shares to elect its own Board of
Directors and make a takeover happen well in a Pac Man defense as blinky is
snarfing up shares of inky, inky buys shares of blinky sort of turning the
tables you know like this and while you're gobbling up that competition and [Pacman gobbling competition]
don't forget to eat a bunch of cherries or a strawberry every once in a while
because you know you still need your fruits and veggies
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