TRUE OR FALSE - A POISON PILL IS WHERE COMPANY FOUNDERS CONTROL THE VOTES BUT DON’T OWN MANY SHARES.
Question
TRUE OR FALSE - A POISON PILL IS WHERE COMPANY FOUNDERS CONTROL THE VOTES BUT DON’T OWN MANY SHARES.
Solution
False. A poison pill is a defensive strategy used by corporations to prevent or discourage hostile takeovers. This strategy can be enacted by the company's board of directors when a hostile takeover is attempted. It allows existing shareholders (except the entity attempting the takeover) to buy more shares at a discount, diluting the value of the shares held by the hostile party and making the takeover more expensive and less attractive. It does not specifically refer to a situation where company founders control the votes but don’t own many shares.
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