A lobster trap, in
corporate finance, is an anti-
takeover 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 rec ...
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 trap
A lobster trap or lobster pot is a portable trap that traps lobsters or crayfish and is used in lobster fishing. In Scotland (chiefly in the north), the word creel is used to refer to a device used to catch lobsters and other crustaceans. A ...
s are designed to catch large
lobsters but allow small lobsters to escape.
Law of Business Formation
: Stephen J. Spielman, International University of Sarajevo
The International University of Sarajevo (IUS) is a private university located in the capital city Sarajevo, Bosnia and Herzegovina. The university was established by the Foundation for the Development of Education in 2004–2005. IUS is open ...
.
See also
*Mergers and acquisitions
Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspect ...
* Takeover
*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 pe ...
*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 ...
References
Mergers and acquisitions
Corporate finance
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