Papa John’s Announces ‘Poison Pill’ and Its Stock Drops Nearly 10 Percent

Papa John's poison pill

Papa John’s Internation Inc. (NASDAQ:PZZA) on Sunday adopted a ‘poison pill,’ or a shareholders rights plan that gives them a 15 percent trigger to stop existing stakeholders from amassing a large controlling stake in the food company. Let’s dig into the Papa John’s poison pill.

Schnatter Attack

The company’s former chairman, John Schnatter, resigned earlier this month as a result of a racial slur and graphic description of violence against minorities in a conversation with the company’s former media agency, Laundry Service. This was just months after he stepped down from the CEO position after critical comments on the NFL’s national anthem controversy. 

Papa John’s has been a long-standing sponsor of the Nation Football League and frequently works with former-NFL QB and future Hall-of-Famer, Payton Manning. Due to Schnatter’s comments, the New York Yankees cut ties with the pizza company. Since then, the former CEO has been removed from all advertisements. 

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Although Schnatter has now resigned as both CEO and chairman, he still holds about 30 percent of the company’s shares. Schnatter founded the company back in 1984. This is why the company stepped in and implemented the rights plan.

Papa John’s Poison Pill

The company also declared a dividend to each shareholder of one right for each outstanding common share. The rights will expire on July 22nd, 2019, and the date for dividend distribution will be August 2nd. 

“The rights plan is intended […] to protect the interests of the company and its stockholders by reducing the likelihood that any person or group gains control of Papa John’s through open market accumulation or other tactics without paying an appropriate control premium,” the company said on Sunday.

PZZA Stock Movement

According to Yahoo Finance, Papa John’s stock has dropped nearly 10% since its close on Friday’s market. PZZA closed the market at $51.59 a share and is currently trading at $46.77. 

At press time, the stock is down -$4.84 (-9.39%). The company’s total market cap is sitting at $1.509 billion.

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