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Greenmail
A tactic where a target company pays a premium to buy back its shares from a hostile acquirer to prevent a takeover, often resulting in a financial loss to the company.
Implications
A strategy where a company buys back its own shares at a premium price from a potential acquirer who has threatened a hostile takeover, often used to prevent an unwanted acquisition and maintain control.
Example
Example: A corporation engages in greenmail by purchasing a block of its own shares from an activist investor at a premium price, averting a hostile takeover and retaining control of the company.
Related Terms
Different from a traditional stock buyback, which is a voluntary return of shares, greenmail involves a buyback under pressure, often at a significant premium, to prevent a takeover.
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