Who and how does someone take out a company with the poison pill?
In: 5
So, a company divides itself into 100 parts, and offers each of those parts for sale. You want to control the entire company. If you own 51 shares, you can compel any issue to go to a vote, and whichever way you vote will be the majority.
The other shareholders decide they don’t want anyone to have that much control, so they call a vote and they set a policy that if any individual comes to own 10% or more of the company, the company will immediately double the number of shares owned by everyone else.
So when you buy your 10th share out of 100, everyone else doubles the number of shares they hold, and you only have 10 shares out of 190.
If you want to buy out the company, you have to convince the board and/or the existing shareholders to repeal the poison pill rule, so the company can be sold.
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