Lobster trap (finance)
Encyclopedia
A lobster trap, in corporate finance
, is an anti-takeover
strategy used by target firms. In a lobster trap, the target firm issues a charter
that prevents individuals with more than 10% ownership of convertible securities
(includes convertible bonds, convertible preferred stock, and warrants) from transferring these securities to voting stock. The term derives from the fact that Lobster trap
s are designed to catch large lobster
s but allow small lobsters to escape.
Corporate finance
Corporate finance is the area of finance dealing with monetary decisions that business enterprises make and the tools and analysis used to make these decisions. The primary goal of corporate finance is to maximize shareholder value while managing the firm's financial risks...
, is an anti-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...
strategy used by target firms. In a lobster trap, the target firm issues a charter
Articles of Incorporation
The Articles of Incorporation are the primary rules governing the management of a corporation in the United States and Canada, and are filed with a state or other regulatory agency.An equivalent term for LLCs in the United States is the Articles of Organization...
that prevents individuals with more than 10% ownership of convertible securities
Convertible security
A convertible security is a security that can be converted into another security. Most convertible securities are bonds or preferred stocks that pay regular quarterly interest and can be converted into shares of common stock if the stock price appreciates to a predetermined...
(includes convertible bonds, convertible preferred stock, and warrants) from transferring these securities to voting stock. The term derives from the fact that Lobster trap
Lobster trap
Not to be confused with Lobster-tailed potA lobster trap or lobster pot is a portable trap that traps lobsters or crayfish and is used in lobster fishing. A lobster trap can hold several lobsters. Lobster traps are constructed of wire and wood. An opening permits the lobster to enter a tunnel of...
s are designed to catch large lobster
Lobster
Clawed lobsters comprise a family of large marine crustaceans. Highly prized as seafood, lobsters are economically important, and are often one of the most profitable commodities in coastal areas they populate.Though several groups of crustaceans are known as lobsters, the clawed lobsters are most...
s but allow small lobsters to escape.
See also
- Mergers and acquisitionsMergers and acquisitionsMergers and acquisitions refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or...
- TakeoverTakeoverIn 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...
- Industrial organizationIndustrial organizationIndustrial organization is the field of economics that builds on the theory of the firm in examining the structure of, and boundaries between, firms and markets....
- Poison PillPoison pillA 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...