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When two companies combine on Wall Street, it's usually by mutual agreemen... From Our Partners This Tiny $4 Stock and 1,000% Gains (in 24 hours) This company is set to unleash what Bill Gates calls "next big thing in computing" -- and could make you up to 1000% gains. But most people haven't even heard of this technology. Now is your chance to jump on board before FDA approval which will send this $4 tech stock soaring. Urgent details here. How a Hostile Takeover Can Benefit You By Scott Chan When two companies combine on Wall Street, it's usually by mutual agreement. The buyer wants to buy and the seller wants to sell. But sometimes, the interest is one sided. The buyer wants to buy, but the target company doesn't want to sell. If the target company's board of directors doesn't approve a sale, the acquiring company can try a hostile takeover. Since a corporation's owners are its shareholders, if the potential buyer gets enough shareholders to back a takeover, the deal can still be done. Tender Offer One way the potential buyer tries to bypass the board is to make a tender offer to shareholders of the target company to buy their shares. The offer is typically made at a premium to the stock's market price to give shareholders more incentive to say okay. Read This Story: Make Money When Wall Street Makes a Deal If the buyer is able to obtain enough shares for controlling interest (the majority of voting shares) in the target company, it can vote for the merge. Usually the tender offer is conditional on the buyer getting enough shares for controlling interest. If this doesn't occur, the offer is withdrawn. However, a tender offer made at a premium helps the target company's stock rally, benefiting shareholders. Proxy Fight The potential buyer could also try to get control of the board through a proxy fight. It will nominate candidates who will support a takeover to replace members of the board that blocked a merger. Before a shareholder meeting, it will mail proxy ballots to shareholders to make a case why they should vote for certain candidates. If they want to vote in favor, the shareholders can instruct the designated proxy to cast votes on their behalf at the meeting. If enough shareholders vote for the board change, the new board can vote in favor of a merger. Note that the target company will also send a proxy ballot to try to convince shareholders to support its candidates. To entice the shareholder to vote against a merger, a company can propose changes that hopefully will improve financial results and create value for shareholders. Or it could opt for one-time "treats" to sweeten the deal, such as special dividends and share buybacks. These moves are favorable to shareholders and can boost the stock price. The 12 Words Every Investor Should Know There are 12 simple words you can tell your broker today that will obligate him to put $1,200 into your account by the day's end. This simple trick works 94% of the time for most people who've done it. To learn these 12 words, click here. A Wake Up Call Usually a target company is vulnerable to a hostile takeover because current management is not doing a good job. Otherwise, if shareholders have faith in the current management and don't believe a change is good, they will not back a merger. Thus, even if the hostile takeover attempt does not succeed, it could still serve as a wake-up call to current management. It can get them to self-analyze and hopefully make changes that benefit shareholders. Read This Story: Q&A: Expert Advice from a Wall Street "Rainmaker" For example, they may decide to reduce executive compensation or at least make the pay more incentive-based, or they could decide to divest under-performing assets to leave a stronger core. The changes could result in better company financial results and a higher stock price both in the short and long term. Tough Pill to Swallow Sometimes, a takeover target will deploy a tactic commonly known as a "poison pill" (officially known as a "shareholder rights plan") to defend against a possible hostile takeover. The shareholder rights plan stipulates that if certain conditions are met, existing shareholders will have the right to purchase additional shares at a large discount. Once triggered, this leads to tremendous share dilution and make it much more difficult for the potential acquirer to obtain controlling interest. For example, a well-known poison pill example occurred in 2012 when Netflix (NSDQ: NFLX) defended itself against activist investor Carl Icahn. After Icahn bought a 10% stake in Netflix, the company gave its shareholders the right to buy two shares of NFLX for the price of one if anyone else bought a new stake of 10% or more or if Netflix is involved in any merger. During the steep market decline earlier this year, dozens of companies fearful of being taken over also adopted poison pills. Read This Story: Profit Taking Points to Deal Making A poison pill could also be used as a negotiation tactic to force the interested buyer to make a more compelling offer. Studies have shown that takeover targets with a poison pill in place resulted in a higher premium and thus a better stock price for shareholders. Despite the toxic-sounding name, a poison pill could be manna for shareholders. Editor's Note: Our colleague Scott Chan just explained how merger and acquisition activity can enrich investors. But maybe this topic doesn't fit your investing style. If you're looking for other promising profit-making opportunities, consider the global roll-out of 5G wireless technology. Ultra-fast 5G ("fifth generation") will form the infrastructure of the Internet of Things (IoT) and as such, 5G will revolutionize our lives. IoT is a seamless system whereby everyday objects are integrated into a data-sharing network. If you're looking for an unstoppable investment trend, you've found it with IoT. Driving IoT will be 5G, the most advanced form of wireless transmission. 5G investments can pay off handsomely, if you pick the right ones. For details on the best 5G play now, follow this link. Philadelphia Water Play Is Yielding Us 72% Started in 1886 by a group of college professors, this unique company may be one of the most boring stocks you'll read about… but don't let that fool you. It now serves more than three million people in eight states. Every 17 days, it snaps up another competitor. It has already rung up a 3,109% profit for us, and it's still a strong buy. Click here to see it for yourself. You are receiving this email at indra21poetra@gmail.com as part of your subscription to Investing Daily. To ensure delivery directly to your inbox, please add postoffice@investingdaily.com to your address book today. Preferences | About Us | Contact Us | Privacy Policy Copyright August 26, 2020 Investing Daily. All rights reserved. Investing Daily, a division of Capitol Information Group, Inc. 7600A Leesburg Pike West Building, Suite 300 Falls Church, VA 22043-2004 U.S.A.