Increasingly, some activist hedge funds are looking to sell their stock positions back to target companies. How should the board respond to hushmail?
The Rise and Fall of Greenmail -
During the heyday of takeovers in the 1980s, so-called corporate raiders would often amass a sizable stock position in a target company, and then threaten or commence a hostile offer for the company. In some cases, the bidder would then approach the target and offer to drop the hostile bid if the target bought back its stock at a significant premium to current market prices. Since target companies had fewer available takeover defenses at that time to fend off opportunistic hostile offers and other abusive takeover transactions, the company might agree to repurchase the shares in order to entice the bidder to withdraw. This practice was referred to as “greenmail,” and some corporate raiders found greenmail easier, and more profitable, than the hostile takeover itself.
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Topics: Activist Hedge Funds, Board of Directors, Buyback Programs, Greenmail, Hedge Funds, Hostile Takeover, Stocks, Target Company
Published In: Business Organization Updates, Business Torts Updates, Securities Updates
DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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