The Return of Poison Pills: An Analysis of “Crisis Pills” Adopted in the COVID-19 Pandemic

56 Pages Posted: 23 Apr 2020 Last revised: 17 Aug 2020

See all articles by Ofer Eldar

Ofer Eldar

Duke University School of Law; Duke University - Fuqua School of Business; Duke Innovation & Entrepreneurship Initiative

Michael D. Wittry

Ohio State University (OSU) - Department of Finance

Date Written: August 14, 2020

Abstract

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

Eldar, Ofer and Wittry, Michael D., The Return of Poison Pills: An Analysis of “Crisis Pills” Adopted in the COVID-19 Pandemic (August 14, 2020). Duke Law School Public Law & Legal Theory Series 2020-18, Fisher College of Business Working Paper No. 2020-03-006, Charles A. Dice Working Paper No. 2020-06, Available at SSRN: https://ssrn.com/abstract=3583428 or http://dx.doi.org/10.2139/ssrn.3583428

Ofer Eldar

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

Michael D. Wittry (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

854 Fisher Hall
2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-292-3217 (Phone)

HOME PAGE: http://fisher.osu.edu/people/wittry.2

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