Anti-Takeover Statute

  

This is an area of the law that is debated on a regular basis (all the snooty universities long-hairs have written about it). In short, state laws can at times err on the side of companies located in that state in the event of a potentially hostile takeover. Basically, these laws keep the opposing team from taking over a corporation, presumably in part to protect jobs within that state.

You can imagine RobotoCo from California, entering a small town in Ohio in a hostile takeover of their sock-making plant, firing all 1,800 employees and replacing them with The Rosie 2000. Cataclysm for the city and not a good sitch for the politicos in the state. And the issues fly directly in the face of state versus federal versus international laws...the shareholders of the sock making company MAY be from Ohio; but they're likely from all over the country. Maybe from all over the world.

So how do anti-takeover laws help the actual owners of the company? And if they're enforced in this sock company, will any new companies ever want to move into Ohio? Will existing companies begin to leave? So yeah...these laws can be good and bad.

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Finance: What is a poison pill?4 Views

00:00

Finance allah shmoop what is a poison pill O romeo

00:08

romeo Wherefore out the ac Well if you can't have

00:12

me nobody can have me pill lug dead dead alright

00:17

that's poison pill allah romeo and juliet and performed by

00:20

your friends here and the corporate version Well it isn't

00:23

all that different In fact there are really two flavors

00:25

of poison pill flintstones chewable lt's called flip ins which

00:29

allow current shareholders to buy a ton more shares at

00:33

a big discount toe where their shares are currently trading

00:36

flippen like if the shares are at forty bucks each

00:39

current shareholder than gets allowed to buy five shares for

00:42

ten bucks each for each share that they currently own

00:45

and have owned for the last in a year About

00:48

that would be a flipping well this flip in process

00:51

dilutes the company dramatically making it harder for an outside

00:55

takeover soldier to come in and you know just buy

00:57

the company that's a flip in the non chewable flintstone

01:01

flavor that you have to actually swallow is called ah

01:03

flip over which comes is a mandate from the board

01:07

allowing current shareholders to buy the shares of the acquirer

01:11

After the merger at a big discount it basically destroys

01:14

enormous value in the combined company making It tastes like

01:17

a bitter moth to ah hungry bat so you know

01:21

he spits it out The basic idea in these poison

01:23

pill defense strategies is to deal with hostile takeovers And

01:28

a lot of those came during the junk bond era

01:30

in the nineteen eighties when cheap high risk capital was

01:33

liquid Lee easily available almost anywhere and companies felt vulnerable

01:39

to short term quick buck wall street sharpies who looked

01:42

great in a dark suit and usually had awesome hair

01:45

So yeah people for details carefully watch wall street the

01:48

first one the good one the one with michael douglas

01:51

when he still had hair and what you don't really 00:01:54.212 --> [endTime] hear there is he said Shmoop is good yeah

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