A Flip-over is an anti-takeover mechanism in which current
shareholders of a targeted firm will have the option to purchase discounted
stock of the acquiring company after the potential takeover, typically at
half price, thereby impairing the acquirer's capital structure and drastically
diluting the interest of the acquirer's other shareholders.
The strategy gives a common stock dividend in the form of
rights to acquire the firm's common stock or preferred stock above market
value. Following a takeover, the rights would "flip over" and allow current
shareholders to purchase the unfriendly competitor's shares at a discount.
If this tool is exercised, the number of shares held by the unfriendly competitors
will realize dilution and price devaluation.