Hedge Fund Glossary

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Poison Pill

an action taken by a company to make its equity less attractive to potential acquirors in order to prevent being acquired in a hostile takeover. Two common types of Poison Pills are the “flip-in,” whereby a company allows current shareholders to purchase additional shares at a discount as a way to dilute the share ownership of the company, thereby making the acquisition of a controlling interest in the company more difficult and expensive, and the “flip-over,” whereby, in the event of a takeover, shareholders are allowed to buy the acquiring company’s shares at a discount.

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