Series 79 practice questioneasyAnti-takeover Defenses
What does a shareholder rights plan, or poison pill, generally do?
- AIt forces the board to accept the highest bid
- BIt guarantees appraisal rights to all holders
- CIt requires debt repayment at par immediately
- DIt dilutes a hostile bidder if ownership crosses a specified threshold✓ Correct answer
Explanation
Why D — It dilutes a hostile bidder if ownership crosses a specified threshold
A poison pill makes an unwanted acquisition more expensive or difficult by diluting a hostile bidder if ownership crosses a specified threshold. It is one of the best-known board-approved takeover defenses.
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