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Description of Flip-over. Explanation.




Definition Flip-over. Description.

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.

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Compare with: Flip-in  |  Anti Hostile Takeover Mechanisms  |  Targeted Repurchase

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