Flip-In Poison Pill

DEFINITION of 'Flip-In Poison Pill'

A type of poison pill strategy in which existing shareholders, but not acquiring shareholders, are allowed to purchase shares in the target company at a discount. A flip-in poison pill takeover defense dilutes the value of the shares purchased by the acquiring company by flooding the market with new shares, while also allowing investors who purchase the new shares to profit instantaneously from the difference between the discounted purchase price and the market price.

BREAKING DOWN 'Flip-In Poison Pill'

Poison pill provisions are often found in a company's bylaws or charter as a public display of their potential use as a takeover defense. This tells any company thinking about a hostile takeover that they will face a lot of difficulties. Companies looking to fight this strategy may try to have a court dissolve any program providing the deep discount, but the chances of success are uncertain.

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RELATED FAQS
  1. What is the difference between a "flip-in" and "flip-over" poison pill?

    Learn about strategies used to defend against hostile takeovers, what a poison pill is and the difference between a flip-in ... Read Answer >>
  2. How effective is a poison pill defense against a hostile takeover?

    Learn about the different types of poison pill strategies that target companies use to prevent hostile takeovers, and understand ... Read Answer >>
  3. What is the difference between a poison pill defense and a suicide pill defense?

    Learn about different strategies a company uses to prevent hostile takeovers and the main difference between a poison pill ... Read Answer >>
  4. Why is a shareholder rights plan called a "poison pill?"

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  5. How are corporate poison pills regulated in the United States?

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