# Poison Pill

*Corporate Finance & M&A — Finicade finance glossary*

A poison pill lets all shareholders except a hostile bidder buy new shares cheaply once that bidder crosses an ownership threshold, massively diluting them. It's the most effective takeover defence ever devised and works by making the acquisition economically impossible rather than by winning an argument. Boards adopt them in days when a stake appears, and shareholders often resent them for blocking a premium.

**Also known as:** shareholder rights plan, rights plan

**Related terms:** [Hostile Takeover](https://finicade.com/glossary/hostile-takeover), [Dilution](https://finicade.com/glossary/dilution), [Corporate Governance](https://finicade.com/glossary/corporate-governance), [Shareholder Rights](https://finicade.com/glossary/shareholder-rights), [Activist Investor](https://finicade.com/glossary/activist-investor)

Source: https://finicade.com/glossary/poison-pill