- Over the past two months, at least 41 companies adopted poison pill contracts or filed to put them to a shareholder vote.
- Poison pills limit the stakes activist investors can take by giving the company the ability to sell new stock to existing shareholders at a discount if a trigger is hit.
- The measure was rarely used during the extended bull market, but desperate boards have turned to it now that activists are pouncing on cheap stocks.
- According to Reuters, which cited FactSet data, the 12 months before March only saw 34 poison pills.
- March was a volatile month for markets, which were rocked by the novel coronavirus pandemic, giving activists a cheap way into companies.
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Activist investors are, in one's own words, "price sensitive like any investor"— meaning if the coronavirus pandemic made an investment much cheaper than it normally would be, they won't hesitate to take advantage.
While activist defense lawyers have taken to the public-relations battlefield to attempt to shame activists out of pouncing during the pandemic, at least 41 companies looked to add an additional layer of protection in March and April: poison pill contracts.
The move is designed to give companies a way to dilute an activist's stake by selling discounted shares once a big enough position is built.
But poison pills are rare, and shareholder advocates say they entrench management and boards that could be incompetent. Institutional Shareholder Services, the influential shareholder consultant, wrote in a recent report that it recommends poison pill contracts lasting less than a year only be used in times of active threats.
Dozens of companies have adopted or presented shareholders with poison-pill contracts since the beginning of March. According to Reuters, citing FactSet data, the 12 months prior to March, only 34 poison pill contracts were adopted — an average of less than three a month.
To be sure, not all of the 41 examples Business Insider reviewed were the result of an activist attack. A few companies like Tenneco, the automotive equipment manufacturer, implemented a shareholder rights plan to prevent a change of control that would eliminate its ability to take advantage of certain tax deductions.
Still, the overall surge indicates companies are feeling threatened.
"A severe stock price decline as a result of the COVID-19 pandemic is likely to be considered valid justification in most cases for adopting a pill of less than one year in duration; however, boards should provide detailed disclosure regarding their choice of duration, or on any decisions to delay or avoid putting plans to a shareholder vote beyond that period," ISS wrote in a report titled "The Pills of March."
Below are the companies who decided to go pursue the contracts over the past two months, and some of the activist investors who are chasing them. The list was compiled with data provided by the law firm of Sidley Austin.
Commvault Systems
Industry: Data management
2019 Revenue: $168 million
Date poison pill was adopted: April 3
Activist: Starboard Value
Manning & Napier
Industry: Investment management firm
2019 Revenue: $136 million
Date poison pill was adopted: April 14
Activist: None reported.
NN Inc
Industry: Industrial manufacturer
2019 Revenue: $847.5 million
Date poison pill was adopted: April 16
Activist: None reported.
ProPetro Services
Industry: Oilfield services
2019 Revenue: $434.79 million
Date poison pill was adopted: April 14
Activist: Dan Wilks
Tenneco
Industry: Automotive equipment
2019 Revenue: $17.45 billion
Date poison pill was adopted: April 14
Activist: Daniel Ninivaggi
Tidewater Inc.
Industry: Ship operator
2019 Revenue: $979 million
Date poison pill was adopted: April 13
Activist: None reported.
Whiting Petroleum
Industry: Hydrocarbon exploration
2019 Revenue: $380.60 million
Date poison pill was adopted: March 27
Activist: None reported.
Hilton Grand Vacations Inc.
Industry: Hospitality
2019 Revenue: $1.8 billion
Date poison pill was adopted: April 16
Activist: None reported
Chico's FAS
Industry: Apparel
2019 Revenue: $2 billion
Date poison pill was adopted: April 2
Activist: Sycamore
Synalloy Corp
Industry: Metals and chemicals maker
2019 Revenue: $310 million
Date poison pill was adopted: March 31
Activist: Privet Fund Management LLC and UPG Enterprises LLC
Six Flags Entertainment
Industry: Amusement parks
2019 Revenue: $1.5 billion
Date poison pill was adopted: March 31
Activist: H Partners
Tailored Brands
Industry: Apparel
2019 Revenue: $3 billion
Date poison pill was adopted: March 30
Activist: Scion Capital
Viad Corp
Industry: Marketing services
2019 Revenue: $1.4 billion
Date poison pill was adopted: March 30
Activist: None reported
AAR Corp
Industry: Aviation Services
2019 Revenue: $2.05 billion
Date poison pill was adopted: March 30
Activist: None reported.
Spirit Airlines
Industry: Aviation
2019 Revenue: $970 million
Date poison pill was adopted: March 30
Activist: None reported.
Tempur Sealy
Industry: Mattress manufacturer
2019 Revenue: $3.1 billion
Date poison pill was adopted: March 27
Activist: None reported.
American Finance Trust
Industry: Real estate investment trust
2019 Revenue: $300 million
Date poison pill was adopted: April 8
Activist: None reported
Groupon
Industry: Online marketplace
2019 Revenue: $2.2 billion
Date poison pill was adopted: April 10
Activist: None reported.
Neuronetics
Industry: Medical technology
2019 Revenue: $62.7 million
Date poison pill was adopted: April 8
Activist: None reported.
Global Net Lease
Industry: Real estate investment trust
2019 Revenue: $306 million
Date poison pill was adopted: April 9
Activist: Starboard Value
Gannett
Industry: Media
2019 Revenue: $1.9 billion
Date poison pill was adopted: April 6
Activist: None reported.
BioSpecifics Technologies
Industry: Biopharmaceutical
2019 Revenue: $38.2 million
Date poison pill was adopted: April 10
Activist: None reported.
Barnes & Noble Education
Industry: Bookselling/online education
2019 Revenue: $2 billion
Date poison pill was adopted: March 25
Activist: Bay Capital Finance LLC
Fluor
Industry: Energy
2019 Revenue: Unknown (annual report delayed)
Date poison pill was adopted: March 25
Activist: Bernhard Capital
Evofem Biosciences
Industry: Biopharmaceutical
2019 Revenue:
Date poison pill was adopted: March 25
Activist: PDL
Delek US Holdings
Industry: Energy
2019 Net income: $310 million
Date poison pill was adopted: March 20
Activist: Carl Icahn
Chefs' Warehouse
Industry: Food Services
2019 Revenue: $1.6 billion
Date poison pill was adopted: March 23
Activist: Legion Partners
Global Eagle Entertainment
Industry: Travel/Entertainment
2019 Revenue: $657 million
Date poison pill was adopted: March 19
Activist: None
Williams Companies
Industry: Energy
2019 Revenue: $8.2 billion
Date poison pill was adopted: March 20
Activist: None
Dave & Buster's
Industry: Leisure/entertainment
2019 Revenue: $1.4 billion
Date poison pill was adopted: March 19
Activist: KKR
Ashford Inc.
Industry: Real-estate investing
2019 Revenue: $291 million
Date poison pill was adopted: March 13
Activist: None
Hexcel Corp
Industry: Manufacturing
2019 Revenue: $2.4 billion
Date poison pill was adopted: April 6
Activist: Fairlight Asset Management
Woodward Inc.
Industry: Manufacturing
2019 Revenue: $2.9 billion
Date poison pill was adopted: April 6
Activist: None
Occidental Petroleum
Industry: Energy
2019 Revenue: $20.4 billion
Date poison pill was adopted: March 13
Activist: Carl Icahn (settled on March 25)
AIkido Pharma
Industry: Pharmaceuticals
2019 Revenue: $9,000
Date poison pill was adopted: March 23
Activist: CVI Investments, Altium Capital Management
Aviat Networks
Industry: Technology/Communications
2019 Revenue: $243.9 million
Date poison pill was adopted: March 3
Activist: Caldwell Mill
Cohen & Co.
Industry: Financial services
2019 Revenue: $49.7 million
Date poison pill was adopted: March 10
Activist: None
Core Molding Technologies
Industry: Manufacturing
2019 Revenue: $284.2 million
Date poison pill was adopted: April 21
Activist: None
Drive Shack
Industry: Leisure
2019 Revenue: $272.1 million
Date poison pill was adopted: March 6
Activist: None
Entercom Communications
Industry: Broadcasting
2019 Revenue: $1.5 billion
Date poison pill was adopted: April 21
Activist: None
Express
Industry: Clothing
2019 Revenue: $2 billion
Date poison pill was adopted: April 21
Activist: None