This is an area of the law that is debated on a regular basis (all the snooty universities long-hairs have written about it). In short, state laws can at times err on the side of companies located in that state in the event of a potentially hostile takeover. Basically, these laws keep the opposing team from taking over a corporation, presumably in part to protect jobs within that state.
You can imagine RobotoCo from California, entering a small town in Ohio in a hostile takeover of their sock-making plant, firing all 1,800 employees and replacing them with The Rosie 2000. Cataclysm for the city and not a good sitch for the politicos in the state. And the issues fly directly in the face of state versus federal versus international laws...the shareholders of the sock making company MAY be from Ohio; but they're likely from all over the country. Maybe from all over the world.
So how do anti-takeover laws help the actual owners of the company? And if they're enforced in this sock company, will any new companies ever want to move into Ohio? Will existing companies begin to leave? So yeah...these laws can be good and bad.
Related or Semi-related Video
Finance: What is the All Holders Rule?4 Views
Finance a la shmoop, what is the all holders rule? No this is not about
post-coital rules of engagement.. The holder here is about those holding stock [Two peoples heads pop out from under a duvet and a stop sign appears]
in a company in this case likely holding stock in a company where a contentious
takeover bid has come in from the cold cruel world outside with a bidder [Pacman]
wanting to pay $17 and 23 cents a share for about a $2 premium over where the
stock was trading yesterday while a rival set of shareholders want more like
20 bucks a share to sell the iPod hearing aid company to just you know [Billboard for the iPod hearing aid company]
sell and go away. Well the all holders rule came along as part of the 1934 Act
if the SEC was establishing granular rules so that the legally [Two people in suits walking down a corridor]
unsophisticated weren't turned into lunch when the hungry Wall Street wolves [A wolf appears and drags one of them away]
got a hankering for deals. So what's the rule with all holders, well it's simply
that all holders of the same exact class of security. i.e. basic common stock have
to be offered the same deal that is one offer can't be given to the people who [Good offer document is given to Company A]
wanted to sell at just 17 dollars and 23 cents and then some other punitive deal [Bad deal given to Company B]
like is offered to the others like you know.. if you don't take this by 4:00 p.m.
next Thursday we'll teepee your homes and then offer at most 16 bucks a share [Angry looking guy in a suit]
going down a dime a week until you say uncle, or aunt yeah well that's the all
holders rule. All holders get the same deal.
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A Pac-Man defense is a strategy for defending against a hostile takeover. Or...against unwelcome houseghosts.