A takeover target might employ whitemail as a defensive technique to try to stop a hostile takeover effort. The target company is blackmailed by issuing a huge number of shares at below-market prices, which are subsequently sold to a favorable third party.
This aids the target in avoiding a takeover by increasing the number of shares required for the acquirer to achieve control, therefore raising the takeover price. It also dilutes the company’s stock. Furthermore, because a friendly third party now owns and controls a big block of shares, the number of friendly shareholders grows.
If the whitemail tactic succeeds in deterring the takeover, the business can either buy back or leave the issued shares on the market.
Whitemail is a defensive strategy that a takeover target can use to try to thwart a hostile takeover attempt. Whitemail involves the target firm issuing a large number of shares at below-market prices, which are then sold to a friendly third party.
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Whitemail is a hostile takeover defense that involves issuing a large number of new shares to friendly shareholders.
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The goal is to dilute the shares enough and secure sufficient proxy votes to fend off an unwanted acquirer.
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A successful whitemail defense can conclude with the target company re-acquiring its new shares.