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BAD Company's stock price is $25, and it has 10.0 million shares outstanding. You believe that if you buy the company and replace its management,
BAD Company's stock price is $25, and it has 10.0 million shares outstanding. You believe that if you buy the company and replace its management, its value will increase by 21%. Assume that BAD has a poison pill with a 15% trigger. If triggered, all target shareholdersother than the acquirerwill be able to buy one new share in BAD for each share they own at a 75% discount. Assume that the price remains at $25 while you are acquiring your shares. If BAD's management decides to resist your buyout attempt, and you cross the 15% threshold of ownership: a. How many new shares will be issued and at what price? b. What will happen to your percentage ownership of BAD? c. What will happen to the price of your shares of BAD? d. Do you lose or gain from triggering the poison pill? If you lose, where does the loss go (who benefits)? If you gain, where does the gain come from (who loses)? C. a. How many new shares will be issued and at what price? Number of new shares issued is (Round to the nearest integer.) The shares will be issued at $ per share. (Round to the nearest cent.) b. What will happen to your percentage ownership of BAD Co.? The percentage ownership will be %. (Round to two decimal places.) c. What will happen to the price of your shares of BAD CO? The new stock price will be $ (Round to two decimal places.) d. Do you lose or gain from triggering the poison pill? The gain (loss) is $. (Round to the nearest dollar, positive if gain, negative if loss, zero if neither.) If you lose, where does the loss go (who benefits)? If you gain, where does the gain come from (who loses)? Every other shareholder in the target firm gains $ per share. (Round to the nearest cent.)
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