A type of poison pill strategy in which shareholders have the option to purchase shares in the acquiring company at a deeply-discounted price. A flip-over pill is a shareholder rights plan used as a defense against hostile takeovers, and is one of the more commonly-used poison pill strategies. The rights plan can be included in the bylaws of the company, meaning that it must be permitted by an acquiring company.
Poison pill rights are usually worthless, until a hostile takeover or merger plan comes into play. In the event of a potential or actual merger, the flip-over plan encourages all shareholders to purchase shares of the acquiring company, which would dilute the equity interest of existing shareholders in the acquiring company who are not permitted to participate.
Investment dictionary. Academic. 2012.
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