A lobster trap, in
corporate finance
Corporate finance is an area of finance that deals with the sources of funding, and the capital structure of businesses, the actions that managers take to increase the Value investing, value of the firm to the shareholders, and the tools and analy ...
, is an anti-
takeover
In business, a takeover is the purchase of one company (the ''target'') by another (the ''acquirer'' or ''bidder''). In the UK, the term refers to the acquisition of a public company whose shares are publicly listed, in contrast to the acquisi ...
strategy used by target firms. In a lobster trap, the target firm issues a
charter
A charter is the grant of authority or rights, stating that the granter formally recognizes the prerogative of the recipient to exercise the rights specified. It is implicit that the granter retains superiority (or sovereignty), and that the ...
that prevents individuals with more than 10% ownership of
convertible securities (includes convertible bonds, convertible preferred stock, and warrants) from transferring these securities to
voting stock. The term derives from the fact that
lobster traps are designed to catch large
lobster
Lobsters are Malacostraca, malacostracans Decapoda, decapod crustaceans of the family (biology), family Nephropidae or its Synonym (taxonomy), synonym Homaridae. They have long bodies with muscular tails and live in crevices or burrows on th ...
s but allow small lobsters to escape.
Law of Business Formation
: Stephen J. Spielman, International University of Sarajevo.
See also
*Mergers and acquisitions
Mergers and acquisitions (M&A) are business transactions in which the ownership of a company, business organization, or one of their operating units is transferred to or consolidated with another entity. They may happen through direct absorpt ...
*Takeover
In business, a takeover is the purchase of one company (the ''target'') by another (the ''acquirer'' or ''bidder''). In the UK, the term refers to the acquisition of a public company whose shares are publicly listed, in contrast to the acquisi ...
*Industrial organization
In economics, industrial organization is a field that builds on the theory of the firm by examining the structure of (and, therefore, the boundaries between) firms and markets. Industrial organization adds real-world complications to the per ...
*Shareholder rights plan
A shareholder rights plan, colloquially known as a "poison pill", is a type of defensive tactic used by a corporation's board of directors against a takeover.
In the field of mergers and acquisitions, shareholder rights plans were devised in the e ...
References
Mergers and acquisitions
Corporate finance
Takeover defense
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