The poison pen letter is a activist shareholder technique popularized by Dan Loeb of Third Point Capital. The activist generally writes a scathing letting directly to the CEO of the target company or its Board detailing the performance of the company and the feelings of the investors. The letter is simultaneously released to the national press. This tactic ensures greater coverage of the approach thus piquing the interest of additional investors who may flock to Third Point’s banner. The increased press interest also puts additional pressure on the recipient to respond as the investor relations department becomes swamped with requests for a comment.
The poison pen tactic has been used by other activist shareholders including Carl Icahn, although in recent years use of the tactic has subsided. Activists such as Dan Loeb now tend to prefer a conciliatory approach rather than a combative one. However, for those interested in the subject, and seeking further information on the colorful episode of the mergers and acquisitions genre we recommend Dear Chairman: Boardroom Battles and the Rise of Shareholder Activism by Jeff Gramm.
The moniker, although in prior common use, serves as an adjunct to the Poison Pill, or Poison Put, types of company defenses used against hostile takeovers.
Example Poison Pen Letter
Since you ascended to your current role of Chief Value Destroyer (“C.V.D.”) when you assumed the formal title of C.E.O. in 1999, the shares have dropped over 45%, a destruction of shareholder value in excess of $520 million.
