In the spring of 1984, Disney Productions stock was selling for about $3.125 per share. (All prices
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When Disney’s buyback of Steinberg’s shares was announced, the stock price fell almost instantly from $4.25 to $2.875. Many Disney stockholders were irate, and they sued to block the buyout. Also, the Disney affair added fuel to the fire in a congressional committee that was holding hearings on proposed legislation that would (1) prohibit someone from acquiring more than 10% of a firm’s stock without making a tender offer for all the remaining shares, (2) prohibit poison pill tactics such as those Disney’s management had used to fight off Steinberg, (3) prohibit buybacks such as the deal eventually offered to Steinberg (greenmail) unless there was an approving vote by stockholders, and (4) prohibit (or substantially curtail) the use of golden parachutes (the one thing Disney’s management did not try).
Set forth the arguments for and against this type of legislation. What provisions, if any, should it contain? Also, look up Disney’s current stock price to see how its stockholders have fared. Note that Disney’s stock was split 3-for-1 in July 1998.
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Related Book For
Fundamentals of Financial Management
ISBN: 978-0324597707
12th edition
Authors: Eugene F. Brigham, Joel F. Houston
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