Flip-Over Pill

DEFINITION of 'Flip-Over Pill'

A type of poison pill strategy in which shareholders have the option to purchase shares in the acquiring company at a deeply-discounted price. A flip-over pill is a shareholder rights plan used as a defense against hostile takeovers, and is one of the more commonly-used poison pill strategies. The rights plan can be included in the bylaws of the company, meaning that it must be permitted by an acquiring company.

BREAKING DOWN 'Flip-Over Pill'

Poison pill rights are usually worthless, until a hostile takeover or merger plan comes into play. In the event of a potential or actual merger, the flip-over plan encourages all shareholders to purchase shares of the acquiring company, which would dilute the equity interest of existing shareholders in the acquiring company who are not permitted to participate.

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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?"

    Discover why shareholder rights plans are often called "poison pills" to fight hostile takeovers and give smaller corporations ... Read Answer >>
  5. How are corporate poison pills regulated in the United States?

    Read a brief overview of shareholder rights plans, otherwise known as the "poison pill" defense, and see how they are regulated ... Read Answer >>
  6. How can a company resist a hostile takeover?

    Learn about some of the defense strategies a public company's board of directors might employ to prevent a hostile bidder ... Read Answer >>
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