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Papa John’s Adoption of ‘Poison Pill’ Worries Investors

Papa John’s is in the midst of a full-on family feud.

The pizza chain’s board of directors decided to move forward with a shareholder rights plan late Sunday—a so-called “poison pill“—to prevent founder John Schnatter from launching a bid to regain control of the company. And just the threat of that battle has rattled investors, sending the company’s shares down as much as 8% in early trading before rebounding slightly.

Schnatter resigned as chairman of Papa John’s earlier this month after reports that he used a racial slur during a conference call with a media agency in May. The company has since pulled his image from marketing and evicted Schnatter from his office. But in recent days, Schnatter has said it was a mistake for him to step down, prompting fears he would try to fight his way back in.

Schnatter reportedly owns 29% of the pizza chain, making him the largest single shareholder.

Under the provision adopted Sunday, the poison pill would kick in if any investor acquires more than 15% of the company’s shares without the approval of directors.

Monday’s slump aside, Papa John’s shares could be an alluring target for takeover. The company’s stock is down nearly 30% since late January. Adding to the woes is the fact that several organizations, including the NFL, have ended their league sponsorships with the chain.