Could its price be too sweet?

• Position: Triad

Once a Wall Street darling with a stock price that peaked at nearly $50 a share in 2003, Krispy Kreme Doughnuts Inc. has been serving up annual losses since 2004, and its stock hasn't surpassed $5 in more than 18 months. Though investors haven't been enamored lately, the Winston-Salem company's board wants to make sure no one becomes overzealous. It adopted a "poison pill" plan to deter hostile takeovers, replacing one approved in 2000 before the company went public.

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If an investor or group buys 15% of Krispy Kreme stock, other shareholders can buy new shares at a bargain price--diluting the potential acquirer's stake and making it harder to get controlling interest. That would give management time to seek other offers or negotiate a premium from the bidder.

In some ways, Krispy Kreme might need a poison pill now more than it did when the company saw shares close at about $38--$9.60 split-adjusted--on its first day of trading. With CEO Jim Morgan shutting down underperforming stores, renegotiating debt and restructuring operations, the company seems poised to return to profitability. Through three quarters of the fiscal year that ended in February, it had lost $677,000, compared with $3.8 billion the previous year.

That improvement--along with shares trading below $3 in early February--might...