General
poison pill
What does poison pill mean?
A defence cooked up by the target's board. The second a raider crosses a set ownership threshold, every other shareholder gets to buy new stock at a deep discount. The raider's stake gets diluted into nothing and the deal becomes too expensive to swallow.
"The board swallowed a poison pill the morning after Musk filed his 13D — nobody was getting this company on the cheap."
Origin
Coined by M&A lawyer Martin Lipton of Wachtell, Lipton, Rosen & Katz in 1982 as the 'shareholder rights plan'.
Frequently asked questions
What does poison pill mean in finance?
A poison pill is a defensive tactic where a company floods the market with cheap shares to make a hostile takeover far too expensive to swallow.
How do you use poison pill in a sentence?
"The board triggered a poison pill the moment the rival's stake crossed the threshold."
Why is it called a poison pill?
The name comes from the idea that the strategy makes the target company "toxic" to acquire, choking off the takeover the way a poison would.
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