Question

Is shareholder wealth affected by proxy contests?

Answer 1

Answer ) A company and complex strategy linked to a hostile takeover of a firm in market.A proxy contest starts as the acquiring person or company tries to convince their shareholders to exercise their proxy voting right to accept new management team that is open to the takeover. The strategy allows the acquired company to avoid paying or giving any premium for the target share sometime also called proxy fight in market.

There are mainly four steps involved in a proxy contest, as

1. The acquiring group of major stakeholders, proxy contest against the target company.
2. These shareholders threaten to use their proxy voting power , to make the target company comply with their wishes
3. If successful in gathering enough proxy votes, elect new board of directors using proxy ballots.
4. The new board will be much more agreeable, and eventually the deal is finalized.

Such activity directly impact the shareholders wealth .