Greenmail Law and Legal Definition

Greenmail or greenmailing is the practice of purchasing enough shares in a firm to threaten a takeover and thereby forcing the target firm to buy those shares back at a higher premium in order to suspend the takeover. It is a corporation's attempt to stop a takeover bid by paying a price above market value for stock held by the aggressor. Greenmail is a practice in corporate Mergers and Acquisitions. Greenmail is money paid to an aggressor to stop an act of aggression. In the case of greenmail, the aggressor is an investor attempting to take over a corporation by buying up a majority of its stock, and money is paid to stop the takeover. The corporation under attack pays an inflated price to buy stock from the aggressor, known popularly as a corporate raider. After a greenmail payment, the takeover attempt is halted.