Question

Company XYZ has 50,000 shares of outstanding stock and 500,0000 shares in reserve. The share price of the stock has been steady at $2.00 per share, but upon the threat of a hostile takeover Company XYZ offers to buy back all outstanding shares at $4.00 per share. This is known as:

Answer 1

A share buyback is when a company offers to repurchase its own outstanding shares from shareholders at a specific price.

Step-by-step explanation:

The situation described in the question is known as a share buyback. A share buyback is when a company offers to repurchase its own outstanding shares from shareholders at a specific price. This is typically done to prevent a hostile takeover or to return excess cash to shareholders.

In this case, Company XYZ is offering to buy back all of its outstanding shares at $4.00 per share, which is higher than the current share price of $2.00. By buying back the shares at a higher price, Company XYZ is incentivizing shareholders to sell back their shares and reduce the number of outstanding shares in the market.

Answer 2

If Company XYZ has 50,000 shares of outstanding stock and 500,0000 shares in reserve. This is known as a: A. greenmail.

What is greenmail?

The act of a firm facing a hostile takeover offering to buy back its outstanding shares at a premium price in an attempt to dissuade the potential acquirer is known as "greenmail." In this instance, Business XYZ is making an offer to repurchase all of its outstanding shares for $4.00 apiece, which is double the going rate of $2.00 per share.

Company XYZ intends to deter the hostile acquisition and safeguard its control and management by providing this higher price. This tactic can be interpreted as a defensive move to keep control of the business and prevent unfavorable outcomes from a takeover.

Therefore the correct option is A..

The complete question is:

Company XYZ has 50,000 shares of outstanding stock and 500,0000 shares in reserve. The share price of the stock has been steady at $2.00 per share, but upon the threat of a hostile takeover Company XYZ offers to buy back all outstanding shares at $4.00 per share. This is known as:

A. greenmail.

B. the golden parachute.

C. the white knight.

D. asset lockup.