Poison Pill Definition

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Definition Of Poison Pill:

A financial tactic that is designed to make an unfriendly takeover very difficult to accomplish.
Often poison pills come in the form of share-rights plans that allow existing stockholders to purchase stock at some fixed price if a takeover bid occurs. At that time, all shareholders, except for the new, outside shareholders, are given the option to buy stock at a sharp discount, which dilutes the ownership of the new shareholder, and thus effectively makes it more difficult for it to exert influence.

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