What defense mechanism involves existing shareholders purchasing additional shares at a discount?

The poison pill defense is a strategy used by companies to deter hostile takeovers. This tactic allows existing shareholders to purchase additional shares of the company's stock at a discount, which results in increasing the total number of shares available. As a result, this dilution makes it more difficult and expensive for an acquiring company to gain control over the target company.

The rationale behind this mechanism is to make the takeover less appealing by lowering the percentage of the company that a potential buyer can control through acquisition. By encouraging current shareholders to buy more shares at a favorable price, the company can fortify itself financially and maintain ownership within its current shareholder base.

In the context of other options, the golden parachute involves contractual agreements providing significant benefits to executives in case of a takeover; the crown jewel defense entails selling off key assets to make the company less attractive to a hostile bidder; and the white knight defense refers to finding a more friendly company to acquire the target instead of a hostile bidder. However, these strategies do not specifically involve existing shareholders purchasing additional shares at a discount.