Poison Pill

A poison pill is a defensive tactic a company's board adopts to make a hostile takeover prohibitively expensive or dilutive, most commonly a shareholder rights plan that lets existing shareholders (other than the hostile acquirer) buy additional shares at a steep discount once someone crosses an ownership threshold, diluting the would-be acquirer's stake.

The tactic does not usually block a takeover permanently; its real purpose is to buy the board time and leverage to negotiate better terms, seek a competing bid, or convince the acquirer to walk away, rather than to be triggered and actually executed in most cases.