Flipover
Encyclopedia
A flip-over is one of five types of poison pill
s in which current shareholder
s of a targeted firm will have the option to purchase discounted stock
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. If this tool is exercised, the number of shares held by the unfriendly competitors will realize dilution and price devaluation.
Poison pill
A shareholder rights plan, colloquially known as a "poison pill", or simply "the pill" is a type of defensive tactic used by a corporation's board of directors against a takeover...
s in which current shareholder
Shareholder
A shareholder or stockholder is an individual or institution that legally owns one or more shares of stock in a public or private corporation. Shareholders own the stock, but not the corporation itself ....
s of a targeted firm will have the option to purchase discounted stock
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...
after the potential takeover
Takeover
In business, a takeover is the purchase of one company by another . In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to the acquisition of a private company.- Friendly takeovers :Before a bidder makes an offer for another...
. 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
Common stock
Common stock is a form of corporate equity ownership, a type of security. It is called "common" to distinguish it from preferred stock. In the event of bankruptcy, common stock investors receive their funds after preferred stock holders, bondholders, creditors, etc...
or preferred stock
Preferred stock
Preferred stock, also called preferred shares, preference shares, or simply preferreds, is a special equity security that has properties of both an equity and a debt instrument and is generally considered a hybrid instrument...
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. If this tool is exercised, the number of shares held by the unfriendly competitors will realize dilution and price devaluation.