The Rise of Anti-Activist Poison Pills
6/16/23, 2:30 PM - 6/16/23, 3:00 PM


Ofer Eldar
Professor of Law, Economics and Finance Duke University


Adriana Robertson
Donald N. Pritzker Professor of Business Law at the University of Chicago Law School. and ECGI


Paper Authors: Ofer Eldar, Tanja Kirmse, Michael D. Wittry

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 actingin-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 “antiactivist” 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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