Bad medicine
A recent paper says shareholders should be concerned when management teams adopt poison pills in response to hedge fund activism.
| Taking the pill: While poison-pill adoptions have decreased, the percentage of companies adopting them in response to activist investors is up, especially in response to hedge funds. |
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| Hurts to swallow: Pill implementation by hedge-fund targets erodes 75% of the initial market reaction, compared to 38% from all other activist types. |
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| Chronic shareholder pain: Of firms targeted by the same hedge funds, those that adopted a poison pill had much worse long-term performance than those that did not. And in the 18 months following pill adoption, firms targeted by hedge funds are less likely to be acquired and, when acquired, command lower premiums than those targeted by other activists. |
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| *“In play”: Pill adopted in response to an identifiable external threat. |
| Source: “Flying off the shelf? Poison pill adoptions in response to takeover attempts and other activism” working paper, Boyson & Pichler, Northeastern University |
| Compiled and designed by Timothy Pollard and Gregg A. Runburg |
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