Question

Targeted share repurchases occur when a company buys back stock from a potential acquirer at a higher than fair-market price. In return, the potential acquirer agrees not to attempt to take over the company. This is an example of:

Block ownership

Greenmail

Poison pill

Restricted voting rights

None of the above

Answer 1

Answer is Greenmail

Block ownership is just holding a large number of shares of the company.

Greenmail is when the target company is forced to repurchase stock of their company from the potential acquirer to prevent hostile takeover of the company. This stock buy back is at substantial premium to the fair market price of the share. So this is basically a fee paid to the acquirer to make it stop an aggressive behavior.

Poison pill is when management makes the company less attractive acquisition target - may be by taking a lot of debt or selling the shares at a significant discount.

Restricted voting rights is also a plan to prevent takeover of a company. This works in sense that when a particular shareholder has holding higher than a threshold %, he or she ceases to enjoy the voting rights.