The Rise of Anti-Activist Poison Pills
Charles A. Dice Center Working Paper No. 2022-07
49 Pages Posted: 24 Aug 2022
Date Written: August 22, 2022
We create a novel dataset of the terms of poison pill plans to examine their prevalence over time. Consistent with the hypothesis that poison pills have responded to the increase in hedge fund activism, recent adoptions have characteristics and provisions that appear to target hedge funds, such as low trigger thresholds. Moreover, using unique data on activist hedge fund views of SEC filings as a proxy for the mere threat of an activist intervention, we show that hedge fund interest strongly predicts pill adoption. Finally, the likelihood of a 13D filing declines after firms adopt “antiactivist” pills. Our analysis has implications for understanding the modern dynamics of market discipline of managers in public corporations, and evaluating policies that regulate defensive tactics.
Keywords: Poison pills, activism, hedge funds, market for corporate control, takeovers
JEL Classification: G30, G34, K22
Suggested Citation: Suggested Citation