Equity · Core
Poison Pill
A poison pill is a rights plan that dilutes a bidder who crosses an ownership trigger — a delay and bargaining chip, not a value creation.
Definition
If anyone crosses a threshold (often 10–15%), other holders can buy cheap stock and dilute the bidder. The board can redeem the pill. It buys time for an auction or a ‘just say no,’ subject to fiduciary duty.
Why it matters
It changes the game theory of creeping control and activist accumulation. It does not change the DCF.
Case
A company drops a pill after a 9.9% activist print. The stock pops on ‘someone cares’ and then waits for the negotiation the pill was meant to structure.
How to read it
Trigger percent, duration, and whether the pill is ‘wolf-pack’ aware. Treat it as process, not as a fundamental.
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