The company’s latest institutional shareholder has made some troubling allegations against it.
There was some intriguing news from a Pfizer (PFE -2.82%) shareholder on Thursday that was not taken well by the market. Confirming media reports, an activist investor has taken a small stake in the healthcare giant, and announced itself with a letter to the company’s board. Investors reacted by trading Pfizer stock down by almost 3%; this was a notably steeper fall than the S&P 500 index’s 0.2% dip.
Starboard confirms involvement
That activist investor is veteran corporate gadfly Starboard Value, which made its letter public just before market open. In it, Starboard confirmed its status as a Pfizer shareholder and, as the media reports stated, it has scheduled a formal meeting with CEO Albert Bourla to discuss potential changes at the company.
It also alleged some rather troubling behavior by Pfizer management, claiming that after the firm contacted ex-CEO Ian Read and former CFO Frank D’Amelio as part of its due diligence process, the pharmaceutical company made threats to those men either directly or via proxy.
Starboard wrote that “we understand that people within Pfizer and/or their representatives have contacted Mr. Read and Mr. D’Amelio and purportedly threatened to commence costly litigation against them, claw back prior compensation, and cancel unvested performance stock units, unless they publicly release a statement supporting the current Chief Executive Officer, Dr. Albert Bourla.”
The activist investor characterized this behavior as “a clear breach of fiduciary duty,” and has called for Pfizer’s board of directors to create a special committee to investigate it.
Troubling accusations
If true and accurate, those allegations indicate that Pfizer management could be scared and/or desperate; those threats are fairly severe. It also suggests a poor approach to handling a challenge such as the entry of an activist investor.
Pfizer has yet to officially respond to Starboard’s letter. According to the activist firm, its meeting with Bourla is scheduled for next Wednesday.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy.