Green mails

You're referring to "greenmail"!

Greenmail is a term used to describe a situation where a corporate raider or activist investor threatens to take over a company by acquiring a significant amount of its stock, unless the company's management agrees to buy back the shares at a premium price. This can be a way for the raider to profit from the situation, while also gaining control over the company.

The term "greenmail" was coined because the raider's actions are often seen as a form of "greenmail" or extortion, where they are essentially holding the company hostage in order to get a better deal.

Here's an example of how greenmail might work:

Let's say a corporate raider, John, acquires 20% of XYZ Inc.'s outstanding shares. John then sends a letter to XYZ's management, stating that he intends to take control of the company unless they agree to buy back his shares at a price of $50 per share, which is significantly higher than the current market price. XYZ's management, fearing a takeover and the potential loss of control, agrees to John's demands and buys back his shares at the higher price.

In this scenario, John has essentially extorted a premium price for his shares, and XYZ's management has given in to his demands in order to avoid a potentially costly and distracting takeover battle.

Greenmail is often seen as a form of corporate raiding, and it can be controversial because it can be seen as a way for wealthy investors to profit from the fear and uncertainty of a potential takeover. However, some argue that greenmail can also be a way for investors to hold companies accountable for their performance and to encourage them to make changes that benefit shareholders.