Suicide Pill

In finance, the term “suicide pill” refers to a potentially hazardous tactic used by companies to prevent hostile takeovers. In every case, a suicide pill renders a company unattractive or unaffordable for attempted acquirers, but it can potentially damage the company.

Typically, a suicide pill involves the enactment of cum rights which enable longstanding company’s shareholder to purchase heavily discounted, newly issued shares. The resulting injection of low-cost shares results in a major drop in individual share value, and consequently in the share of the company held by the potential acquirer. At the same time, the issuance of new shares greatly increases a company’s debt, and can lead to its bankruptcy.

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Editor Daniel Dreier
Daniel Dreier is editor and personal finance expert at moneyland.ch.

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