In this video on Greenmail, here we discuss how greenmail works along with examples and effective measures the target company can take in such a situation.
𝐆𝐫𝐞𝐞𝐧𝐦𝐚𝐢𝐥 𝐃𝐞𝐟𝐢𝐧𝐢𝐭𝐢𝐨𝐧
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Greenmail is a profit-making tactic in which the investor purchases the target company's large stakes and then threatens the target company with hostile takeover and creates a situation in such a way that the target company is forced to buy back their stock at a significant premium.
𝐖𝐨𝐫𝐤𝐢𝐧𝐠 𝐨𝐟 𝐆𝐫𝐞𝐞𝐧𝐦𝐚𝐢𝐥
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The following is the process of greenmail -
#1 - Purchase = Through purchasing their stocks from the open market, a corporate raider or a shareholder takes hold of a large stake in the target company.
#2 - Struggle = The target company is threatened by a hostile takeover, but they offer to sell the purchased stock to the target company at a premium price far above the market value.
#3 - Sale = At a higher price, the corporate raider sells their share. The target company uses investor money to pay the buyback premium price.
To know more about the 𝐆𝐫𝐞𝐞𝐧𝐦𝐚𝐢𝐥, you can go to this 𝐥𝐢𝐧𝐤 𝐡𝐞𝐫𝐞:-
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