CIMA Exam CIMAPRA19-F03-1 Topic 6 Question 102 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam

Question #: 102
Topic #: 6

Company ABC's management has noticed that Company BCD has quickly built up a 20% stake by buying shares in Company ABC and are concerned that this is the start of a hostile bid.

This build-up of shares triggers the poison pill provision which automatically converts the rights to buy future preference shares previously issued to existing shareholders in Company ABC to full ordinary shares

What is the most likely impact of the triggering of a poison pill strategy at this stage in the bidding process?

AIt is too late for a poison pill strategy to have any impact on a hostile takeover because Company BCD has already built up a significant stake in Company ABC.

BCompany BCD loses value on its shareholding and has to sell at a loss before losing more value

CCompany ABC becomes less attractive due to a fall in value of the shares as a result of the discount.

DThe threat of a hostile takeover is reduced because Company ABC becomes more expensive to buy.

Show Suggested Answer

Suggested Answer: D

by Carmen at Nov 14, 2024, 04:31 PM

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