HFA Inc.’s stock price is $15 per share and there are 5 million shares outstanding. Assume that HFA has a poison pill in place with a 15% trigger. Trigger will allow all existing shareholders (except for potential acquirer) will be able to purchase additional share for each share they own at 20% discount. If HFA decides to resist a buyout attempt, and acquirer crosses 15% threshold position (assume the price stays at $15 as acquirer accumulates shares):
- How many new shares will be issued? What will be the price of these additional shares?
- What will be percentage stake of acquirer after the offer of additional shares?
- What will be the new price of HFA after this dilution?