Asked by drishika gulati on Jul 20, 2024
Verified
The management of Traynor Enterprises is fighting a takeover attempt led by one of its shareholders. To try and stop this takeover, management decides to offer the shareholder $50 a share if she will sell all of her shares in the firm. Traynor stock is currently priced at $36 a share. This offer is an example of:
A) A poison pill.
B) A share rights plan.
C) Greenmail.
D) A bear hug.
E) A golden handshake.
Greenmail
A situation where a company pays a premium to buy back its own stock from a shareholder to avert a takeover attempt.
Takeover Attempt
An effort by one company to acquire control of another company, often through the purchase of a majority of its stock.
Share Rights Plan
A strategy used by companies to defend against hostile takeovers by allowing shareholders to buy additional shares at a discount.
- Identify the strategies employed by corporations to evade acquisition attempts.
Verified Answer
AR
Angelo RosalesJul 25, 2024
Final Answer :
C
Explanation :
Greenmail refers to the strategy where a company pays a premium to a shareholder for their shares to prevent a takeover attempt. In this scenario, Traynor Enterprises is offering to buy back shares at a premium to stop a takeover, which is a classic example of greenmail.
Learning Objectives
- Identify the strategies employed by corporations to evade acquisition attempts.