The primary purpose of a flip-in provision is to:
A) increase the number of shares outstanding while also increasing the value per share.
B) dilute a corporate raider's ownership position.
C) reduce the market value of each share of stock.
D) give the existing corporate directors the sole right to remove a poison pill.
E) provide additional compensation to any senior manager who loses his or her job as a result of a corporate takeover.

Question

Quizplus · Accepted Answer

A flip-in provision is a type of poison pill defense mechanism used by companies to deter hostile takeovers. It allows existing shareholders, excluding the hostile bidder, to purchase additional shares at a discounted price, thereby diluting the raider's ownership position and making the takeover more expensive. This can discourage the raider from proceeding with the takeover, as their potential gains are reduced.

The Primary Purpose of a Flip-In Provision Is To