noun General Slang

Poison pill

· noun · finance

Defensive trick that floods the market with cheap shares to choke a hostile takeover.

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Definitions

1

A defence cooked up by the target's board. The second a raider crosses a set ownership threshold, every other shareholder gets to buy new stock at a deep discount. The raider's stake gets diluted into nothing and the deal becomes too expensive to swallow.

“The board swallowed a poison pill the morning after Musk filed his 13D — nobody was getting this company on the cheap.”
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2

By extension, any clause buried in a contract or bill designed to make the whole thing toxic to the other side.

“Republicans tucked a poison pill into the spending bill knowing the Senate would never wear it.”
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Poison pill In A Sentence

The board swallowed a poison pill the morning after Musk filed his 13D — nobody was getting this company on the cheap.
Republicans tucked a poison pill into the spending bill knowing the Senate would never wear it.

Origin & Usage

Coined by M&A lawyer Martin Lipton of Wachtell, Lipton, Rosen & Katz in 1982 as the 'shareholder rights plan'.

Variants poison-pillshareholder rights plan
Tags #finance#wall-street#m-and-a#corporate-law

People Also Ask

What does poison pill mean in finance?

A poison pill is a defensive tactic where a company floods the market with cheap shares to make a hostile takeover far too expensive to swallow.

How do you use poison pill in a sentence?

"The board triggered a poison pill the moment the rival's stake crossed the threshold."

Why is it called a poison pill?

The name comes from the idea that the strategy makes the target company "toxic" to acquire, choking off the takeover the way a poison would.

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