1. Gamestops current stock price is $30 and it has 9 million shares outstanding. The company has been performing quite poorly over the last few years. Alpha Capital believes that it can turnaround the company by replacing the management of the firm. However, the presence of poison pill provision in Gamestop, with a 35% trigger, will make any takeover attempt difficult and costly. If the poison pill is triggered, all Gamestops shareholdersother than the acquirerwill be able to buy 4 new shares in Gamestop for each share they own at a 35% discount. Assume that the price remains at $30 while Alpha Capital acquires the shares. If Gamestops management decides to resist Alphas buyout attempt, and Alpha crosses the 35% threshold of ownership (7 marks):

a. How many new shares will be issued and at what price? (1.5 mark)

b. What will happen to Alphas percentage ownership of Gamestop? (1.5 marks)

c. What will happen to the price of shares owned by Alpha Capital? (1.5 marks)

d. Does Alpha Capital lose or gain from triggering the poison pill? If Alpha Capital loses, where does the loss go (who benefits)? If Alpha Capital gains, from where does the gain come (who loses)? (2.5 marks)