Flip-over Pill

Definition - What does Flip-over Pill mean?

A flip-over pill is a type of defensive poison pill tactic that allows shareholders of a targeted firm to buy shares of the acquiring company at a discounted price during a hostile takeover bid.

Divestopedia explains Flip-over Pill

This strategy gives the target company’s shareholders rights that have an expiration date and can only be exercised if a takeover bid is successful. If the acquisition is completed, the rights allow the target firm's shareholders to purchase the acquirer’s shares at a discounted price or below market value. This, in turn, devalues and dilutes the price of the acquirer’s shares.

The flip-over pill strategy is designed to make the transaction unattractive to the acquirer to the point of ending the takeover or compelling them to negotiate terms with the board of directors. This strategy is only used by firms that have adopted the bylaw.

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