Definition

Noun: 1. A corporate finance practice: The act of buying a large amount of a company's stock to threaten a hostile takeover, thereby pressuring the company's management to buy back those shares at a higher price (a premium) to avoid the takeover.

Usage

• Greenmail is a specific and controversial tactic in the financial world.
• It is typically used by an individual or group (often called a "corporate raider") against a publicly traded company.
• The word is a portmanteau of "green" (referring to money) and "blackmail."

Examples

• The activist investor engaged in greenmail by acquiring a 15% stake and then forcing the board to repurchase his shares at a 50% premium.
• To avoid a hostile takeover, the company paid greenmail, which angered its long-term shareholders.
• The practice of greenmail became less common after changes in securities regulations.

Advanced Usage

• To greenmail (verb, less common): The act of executing this practice.
  • The raider attempted to greenmail the technology firm.
• Greenmailer (noun): A person or entity that practices greenmail.
  • The board viewed the new major shareholder as a potential greenmailer.

Variants and Related Words

• Blackmail (noun): The act of demanding money or another benefit from someone in return for not revealing compromising information. (Note: Greenmail is a specific financial analogy of this concept.)
• Hostile Takeover (noun): An acquisition of a company against the wishes of its management and board.
• Corporate Raider (noun): An investor who specializes in hostile takeovers.

Synonyms

• Corporate blackmail (informal)
• Takeover threat arbitrage (technical)

Related Idioms/Phrases

• To pay greenmail: The action taken by the target company.
  • The directors decided it was better to pay greenmail than risk losing control of the company.

Noun

1. (corporation) the practice of purchasing enough shares in a firm to threaten a takeover and thereby forcing the owners to buy those shares back at a premium in order to stay in business