POISON PUT Meaning and
Definition
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A poison put is a financial term referring to a provision in a contract or agreement that allows an investor or bondholder to demand early repayment of their investment at a premium if certain predetermined conditions are met. This provision acts as a deterrent or defense mechanism against hostile takeovers or unfriendly mergers and acquisitions.
Typically, a poison put provision is triggered when a specific event occurs, such as a change in control, the sale of a significant amount of assets, or a decline in the credit rating of the borrower. Once triggered, the investor has the right to sell their investment back to the issuer or borrower at a predetermined price, often higher than the current market value.
The purpose of a poison put is to discourage potential acquirers or hostile bidders from pursuing aggressive actions that could negatively impact the existing investor. By forcing the acquirer to buy back the investment at a premium, it increases the cost of the acquisition and potentially makes it less attractive or financially viable.
While poison puts provide protection to investors, they can also deter potential lenders or bondholders, as it increases the risk for the borrower. This might result in higher interest rates or reduced access to capital markets.
Overall, poison puts act as a defensive tactic, giving investors an option to exit their investment if specific events occur, providing them with a level of protection against unfriendly takeovers.
Common Misspellings for POISON PUT
- ooison put
- loison put
- -oison put
- 0oison put
- piison put
- pkison put
- plison put
- ppison put
- p0ison put
- p9ison put
- pouson put
- pojson put
- pokson put
- pooson put
- po9son put
- po8son put
- poiaon put
- poizon put
- poixon put
- poidon put
Etymology of POISON PUT
The term "poison put" originates from the field of finance and specifically from the realm of corporate finance and mergers and acquisitions. word "poison" in this context refers to a toxic or harmful substance, something that is detrimental or dangerous. "Put" refers to a type of financial option, known as a "put option". A put option gives the holder the right, but not the obligation, to sell an asset at a specific price within a certain timeframe. term "poison put" was coined to describe a provision in a corporate bond or loan agreement that grants the bondholder or lender the right to demand the full repayment of their debt if certain predefined events occur. These events are typically negative for the company such as a change in control, merger, or acquisition. The poison put acts as a deterrent to potential acquirers or hostile takeovers, as it increases the financial burden and risk for the acquiring party.
