Macaroni Defense

DEFINITION of 'Macaroni Defense'

An approach taken by a company that does not want to be taken over. The company issues a large number of bonds with the condition they must be redeemed at a high price if the company is taken over.

BREAKING DOWN 'Macaroni Defense'

Why is it called Macaroni Defense? Because if a company is in danger, the redemption price of the bonds expands like Macaroni in a pot!

RELATED TERMS
  1. Chastity Bond

    A bond that matures immediately upon the completion of a trigger ...
  2. Mandatory Redemption Schedule

    Specified dates when a bond issuer is required to redeem all ...
  3. Anti-Takeover Measure

    Measures taken on a continual or sporadic basis by a firm's management ...
  4. Callable Bond

    A bond that can be redeemed by the issuer prior to its maturity. ...
  5. Term Bond

    Bonds from the same issue that share the same maturity dates. ...
  6. Call Date

    The date on which a bond can be redeemed before maturity. If ...
Related Articles
  1. Markets

    Why Companies Issue Bonds

    One way for a company to raise money is to issue bonds.
  2. Markets

    Corporate Bond Basics: Learn to Invest

    Understand the basics of corporate bonds to increase your chances of positive returns.
  3. Personal Finance

    How To Choose The Right Bond For You

    Bond investing is a stable and low-risk way to diversify a portfolio. However, knowing which types of bonds are right for you is not always easy.
  4. Markets

    Savings Bonds For Income And Safety

    Bonds offer undeniable benefits to investors, including safety and tax advantages.
  5. Markets

    Why Companies Issue Bonds

    When companies need to raise money, issuing bonds is one way to do it. A bond functions like a loan between an investor and a corporation.
  6. Markets

    Common Bond-Buying Mistakes

    Avoid these errors made daily in bond portfolios everywhere.
  7. ETFs & Mutual Funds

    Understanding Redemption

    In the investing world, redemption refers to cashing out the value of bonds or mutual funds.
  8. Managing Wealth

    The Basics Of Bonds

    Bonds play an important part in your portfolio as you age; learning about them makes good financial sense.
  9. Investing

    Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  10. Managing Wealth

    How To Evaluate Bond Performance

    Learn about how investors should evaluate bond performance. See how the maturity of a bond can impact its exposure to interest rate risk.
RELATED FAQS
  1. Why would a company choose to repurchase in lieu of redeem?

    Learn the difference between a stock repurchase and a stock redemption, and find out about the reasons why a company might ... Read Answer >>
  2. Why do some investors prefer convertible over “straight” bonds?

  3. Under what circumstances might an issuer redeem a callable bond?

    Understand why an interest rate drop usually compels bond issuers to redeem callable bonds and re-issue them at the new, ... Read Answer >>
  4. What happens to the price of a premium bond as it approaches maturity?

    Learn how bonds trade in regard to premiums and discounts, and how bond prices shift closer to par value as bonds approach ... Read Answer >>
  5. Why is my bond worth less than face value?

    Find out how bonds can be issued or traded for less than their listed face values, and learn what causes bond prices to fluctuate ... Read Answer >>
  6. What risk factors should investors consider before purchasing a callable bond?

    Understand the difference between callable and non-callable bonds and consider all the various risk factors associated with ... Read Answer >>
Hot Definitions
  1. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  2. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  3. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  4. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  5. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  6. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
Trading Center