A flip-over is one of five types of poison pills in which current shareholders of a targeted firm will have the option to purchase discounted company shares after the potential takeover. Introduced in late 1984 and adopted by many firms, the strategy gave a common stock dividend in the form of rights to acquire the firm's common stock or preferred stock under market value. Following a takeover, the rights would "flip over" and allow the current shareholder to purchase the unfriendly competitor's shares at a discount.[1] If this tool is exercised, the number of shares held by the unfriendly competitors will realize dilution and price devaluation.

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Footnotes

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  1. Hitt et al. (2001), p. 74.

References

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  • Hitt, Michael A.; Harrison, Jeffrey S.; Ireland, Duane R. (2001), Mergers and Acquisitions: a Guide to Creating Value for Stakeholders, Oxford University Press US, ISBN 978-0-19-511285-6