Definition - What does Greenmail mean?

Greenmail is the process in which a buyer acquires a large number of a target company's shares and threatens a hostile takeover but, instead, forces the target company to then buy back their shares at a higher price.

Divestopedia explains Greenmail

Greenmail is a challenging situation for target companies, as they are forced to make the decision between being taken over or paying a high premium to buy back their own shares. In most cases, target firms choose to pay the premium and avoid a hostile takeover. However, target firms must be careful and aware of such hostile plays in order to prevent falling victim to them.

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