Greenmail refers to the fact

Greenmail refers to a situation where a corporate raider or an 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 is often done to extract a profit from the company without actually taking control of it.

The term "greenmail" was coined because the raider's actions are often seen as a form of extortion, similar to a "greenmail" letter, which is a type of blackmail letter. The raider is essentially saying, "Pay me off, or I'll take over your company and make changes that you don't want."

Greenmail can be a costly and distracting experience for a company, as it can lead to a decline in stock price and a loss of investor confidence. It can also create uncertainty and disrupt the company's operations, as management focuses on defending against the takeover threat rather than running the business.

In the 1980s, greenmail became a significant issue in the United States, with several high-profile cases involving corporate raiders like T. Boone Pickens and Carl Icahn. In response, the US Congress passed the 1986 Insider Trading and Securities Fraud Enforcement Act, which made it easier for companies to defend against greenmail attempts.