Targeted Registered Offering - Explained
What is Greenmail?
- Marketing, Advertising, Sales & PR
- Accounting, Taxation, and Reporting
- Professionalism & Career Development
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Business Management & Operations
- Economics, Finance, & Analytics
Table of ContentsWhat is a Targeted Registered Offering?How does Greenmail Work? The Gentleman Greenmailer Greenmail Outlawed Academic Research on Targeted Registered Offering
What is a Targeted Registered Offering?
Greenmail is the green counterpart of blackmail in that it serves the purpose of threatening a hostile takeover from a specific target by buying enough percentage of shares in the target firm, and then goading the target into buying back these shares at a premium. This substantial sum paid to repurchase the shares and avoid a hostile takeover is called Greenmail.
Back To: BUSINESS LAW
How does Greenmail Work?
Greenmail is the windfall acquired via the open threat of a hostile takeover. It prevents the takeover during mergers and acquisitions by throwing money at the problem, hence the name. Companies are forced to buy back their shares at inflated prices to deal with an aggressive majority shareholder, a.k.a a corporate raider.
Greenmail affords the target firm some breathing room to negotiate with the shareholder, who may or may not agree to halt all buying and stop threatening to takeover the firm. Greenmail is a combination of blackmail+greenback dollars. Corporate mergers in the 1980s saw a huge wave of greenmails derailing their targets. Most corporate raiders initiate hostile takeover bids with the sole intention of raking in some moolah. The merger never sees the light of the day.
Greenmail is much more stringently regulated in recent times with an excise tax of 50% levied on such profits by the Internal Revenue Service (IRS) since 1987. It still occurs in corporation but most regulatory restrictions prevent companies from buying back shares above market prices from short-term investors.
Companies also resort to poison pill tactics to thwart greenmail attempts. Greenmail is sometimes used to put up proxy contests that can derail management goals and operations.
Back to: Business Transactions