The Rise of Anti-Activist Poison Pills

The Rise of Anti-Activist Poison Pills

Ofer Eldar, Tanja Kirmse, Michael D. Wittry

Series number :

Serial Number: 
869/2023

Date posted :

January 13 2023

Last revised :

January 13 2023
SSRN Share

Keywords

  • poison pills • 
  • Activism • 
  • Hedge Funds • 
  • Market for Corporate Control • 
  • takeovers

We provide the first systematic evidence of contractual innovation in the terms of poison pill plans. In response to the increase in hedge fund activism, pills have changed to include anti-activist provisions, such as low trigger thresholds and acting-in-concert provisions.

Using unique data on hedge fund views of SEC filings as a proxy for the threat of activists' interventions, we show that hedge fund interest predicts pill adoptions. Moreover, the likelihood of a 13D filing declines after firms adopt "anti-activist" pills, suggesting that pills are effective in deterring activists. The results are particularly strong for "NOL" pills that, due to tax laws, have a five percent trigger. Our analysis has implications for understanding the modern dynamics of market discipline of managers in public corporations and evaluating policies that regulate defensive tactics.

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Authors

Real name:
Michael D. Wittry
Real name:
Tanja Kirmse