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

Actual exam question for CIMA's CIMAPRA19-F03-1 exam
Question #: 102
Topic #: 6
[All CIMAPRA19-F03-1 Questions]

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?

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Suggested Answer: D

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

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Krystina
2 months ago
I'm torn between B and D. The poison pill could either hurt the hostile bidder's investment or make the acquisition more costly. Interesting dilemma.
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Loreta
20 days ago
It's a tough decision. Both options have valid points. It really depends on how Company BCD reacts to the poison pill provision.
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Monte
24 days ago
But option D could also be true. The threat of a hostile takeover is reduced because Company ABC becomes more expensive to buy.
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Lachelle
1 months ago
I think option B is more likely. Company BCD would lose value on their shareholding if the poison pill is triggered.
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Casey
2 months ago
But isn't it too late for the poison pill strategy to have any impact since Company BCD already has a significant stake?
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Gertude
2 months ago
Ha! This is like a game of corporate chess. I bet the management at Company ABC is feeling pretty clever with this poison pill strategy.
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Omer
2 months ago
I agree with Irma. Company BCD will have to think twice before proceeding with a hostile bid.
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Elbert
2 months ago
I'm going to go with C. The discount on the shares due to the poison pill will make the company less attractive to the hostile bidder.
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Eva
26 days ago
So, triggering the poison pill provision could actually help Company ABC in deterring the hostile bid.
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Theola
1 months ago
That's true, but the overall value of the company would still decrease, making it less appealing for a hostile takeover.
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Gwen
1 months ago
But wouldn't Company BCD still be able to buy the shares at a lower price even with the discount?
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Rebecka
2 months ago
I think C is the best option. The discount on the shares will definitely make Company ABC less attractive to Company BCD.
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Irma
2 months ago
I think the triggering of a poison pill strategy will make it harder for Company BCD to acquire Company ABC.
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Rolland
2 months ago
Hmm, I think the answer is D. The poison pill strategy should make it more expensive for the hostile bidder to acquire the company, reducing the threat of a takeover.
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Gary
29 days ago
True, but it still adds a layer of protection for Company ABC and makes it more difficult for Company BCD to acquire the company.
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Elza
30 days ago
In that case, the poison pill strategy may not be as effective in deterring the hostile takeover.
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Carma
1 months ago
But what if Company BCD is willing to pay the higher price to acquire Company ABC?
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Jennie
2 months ago
I agree, D seems like the most likely impact of triggering a poison pill strategy.
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