The Return of Poison Pills: An Analysis of “Crisis Pills” Adopted in the COVID-19 Pandemic
Charles A. Dice Working Paper No. 2020-06
56 Pages Posted: 23 Apr 2020 Last revised: 17 Aug 2020
Date Written: August 14, 2020
During the coronavirus (COVID-19) crisis, a large number of firms adopted poison pills. We find that these “crisis pills” follow a decline in valuations and that stock prices increase upon their announcement. This increase is driven by (1) firms in which activist shareholders acquire ownership stakes and (2) firms that had high exposure to the crisis. Likewise, we find a positive stock price reaction to pills with characteristics that target activist investors. Our results suggest that crisis pills that target stock acquisitions at deflated prices benefit shareholders, and that rigid guidelines on poison pills in crisis situations are unwarranted.
Keywords: Poison pills, crisis pills, coronavirus, COVID-19, activist interventions
JEL Classification: G30, G32, G34, G38, E32
Suggested Citation: Suggested Citation