Why Pfizer stock fell nearly 3% on Thursday

There was some interesting news from a Pfizer (PFE -2.82%) shareholder on Thursday which was not well received by the market. Confirming media reports, an activist investor took a small stake in the healthcare giant and announced it in a letter to the company’s board of directors. Investors reacted by trading Pfizer shares down nearly 3%; this was a considerably steeper fall than that S&P 500 decrease of the index by 0.2%.

Tribord confirms involvement

This activist investor is veteran gadfly Starboard Value, who made his letter public just before the market opened. As part of it, Starboard confirmed its status as a Pfizer shareholder and, as the press reported, scheduled an official meeting with CEO Albert Bourla to discuss potential changes to the company.

It also alleged some rather troubling behavior on the part of Pfizer management, claiming that after the firm contacted former 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 by proxy. .

Starboard wrote that “we understand that people within Pfizer and/or their representatives have contacted Mr. Read and Mr. D’Amelio and allegedly threatened to initiate costly litigation against them, to recover compensation prior and that they will cancel the unvested performance share units unless he has publicly released a statement endorsing the current CEO, Dr. Albert Bourla.”

The activist investor characterized the behavior as “a clear breach of fiduciary duty” and called on Pfizer’s board to create a special committee to investigate it.

Disturbing allegations

If true and accurate, those statements indicate that Pfizer management may be scared and/or desperate; those threats are quite 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, his meeting with Bourla is scheduled for next Wednesday.