BAD Company's stock price is $25, and the firm has 2 million shares outstanding. You believe you can increase the company's value if you buy it and replace the management. Assume that BAD has a poison pill with a 20% trigger. If triggered, all BAD's shareholders-other than the acquirer-will be able to buy one new share in BAD for each share they own at a 75% discount. Assume that the price remains at $25 while you are acquiring your shares. If BAD's management decides to resist your buyout attempt, and you cross the 20% threshold of ownership: a. How many new shares will be issued and at what price? b. What will happen to your percentage ownership of BAD? c. What will happen to the price of your shares of BAD? d. Do you lose or gain from triggering the poison pill? If you lose, where does the loss go (who benefits)? If you gain, from where does the gain come (who loses)? a. How many new shares will be issued and at what price? The number of new shares issued is 1600000. (Round to the nearest integer.) The new shares will be issued at $ 6.25 per share. (Round to the nearest cent.) b. What will happen to your percentage ownership of BAD? Your percentage ownership of BAD Company will be 11.11 %. (Round to two decimal places.) c. What will happen to the price of your shares of BAD? The new stock price of your shares of BAD Company will be $ 16.67. (Round to the nearest cent.) d. Do you lose or gain from triggering the poison pill? If you lose, where does the loss go (who benefits)? If you gain, from where does the gain come (who loses)? The amount that you gain or lose if the poison pill is triggered will be $. (Round to the nearest dollar.)
BAD Company's stock price is $25, and the firm has 2 million shares outstanding. You believe you can increase the company's value if you buy it and replace the management. Assume that BAD has a poison pill with a 20% trigger. If triggered, all BAD's shareholders-other than the acquirer-will be able to buy one new share in BAD for each share they own at a 75% discount. Assume that the price remains at $25 while you are acquiring your shares. If BAD's management decides to resist your buyout attempt, and you cross the 20% threshold of ownership: a. How many new shares will be issued and at what price? b. What will happen to your percentage ownership of BAD? c. What will happen to the price of your shares of BAD? d. Do you lose or gain from triggering the poison pill? If you lose, where does the loss go (who benefits)? If you gain, from where does the gain come (who loses)? a. How many new shares will be issued and at what price? The number of new shares issued is 1600000. (Round to the nearest integer.) The new shares will be issued at $ 6.25 per share. (Round to the nearest cent.) b. What will happen to your percentage ownership of BAD? Your percentage ownership of BAD Company will be 11.11 %. (Round to two decimal places.) c. What will happen to the price of your shares of BAD? The new stock price of your shares of BAD Company will be $ 16.67. (Round to the nearest cent.) d. Do you lose or gain from triggering the poison pill? If you lose, where does the loss go (who benefits)? If you gain, from where does the gain come (who loses)? The amount that you gain or lose if the poison pill is triggered will be $. (Round to the nearest dollar.)
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter22: Mergers And Corporate Control
Section: Chapter Questions
Problem 2MC: Hager’s Home Repair Company, a regional hardware chain, which specializes in “do-it-yourself”...
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Transcribed Image Text:BAD Company's stock price is $25, and the firm has 2 million shares outstanding. You believe you can increase the company's value if you buy it and replace the
management. Assume that BAD has a poison pill with a 20% trigger. If triggered, all BAD's shareholders-other than the acquirer-will be able to buy one new
share in BAD for each share they own at a 75% discount. Assume that the price remains at $25 while you are acquiring your shares. If BAD's management decides
to resist your buyout attempt, and you cross the 20% threshold of ownership:
a. How many new shares will be issued and at what price?
b. What will happen to your percentage ownership of BAD?
c. What will happen to the price of your shares of BAD?
d. Do you lose or gain from triggering the poison pill? If you lose, where does the loss go (who benefits)? If you gain, from where does the gain come (who loses)?
CITA
a. How many new shares will be issued and at what price?
The number of new shares issued is 1600000. (Round to the nearest integer.)
The new shares will be issued at $6.25 per share. (Round to the nearest cent.)
b. What will happen to your percentage ownership of BAD?
Your percentage ownership of BAD Company will be 11.11%. (Round to two decimal places.)
c. What will happen to the price of your shares of BAD?
The new stock price of your shares of BAD Company will be $ 16.67. (Round to the nearest cent.)
d. Do you lose or gain from triggering the poison pill? If you lose, where does the loss go (who benefits)? If you gain, from where does the gain come (who loses)?
The amount that you gain or lose if the poison pill is triggered will be $
(Round to the nearest dollar.)
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