Which one of the following is an example of a poison pill?
A) A firm that sells its efficient business division because it interests the acquirer.
B) A firm that pays all its cash as dividends to existing shareholders because it interests the acquirer.
C) A firm that opens talks with another potential acquirer.
D) A firm that distributes new shares to the existing shareholders at a discount in the event of a takeover.

Question

Quizplus · Accepted Answer

Option D is an example of a poison pill strategy. By issuing new shares at a discounted price, the company makes it more expensive for the acquiring company to gain control. This strategy dilutes the value of existing shares and increases the cost of the acquisition, making it less attractive to the potential acquirer.

Which One of the Following Is an Example of a Poison