Starboard Value, an activist fund led by Jeff Smith, has recently acquired a significant stake in graphics-design company Autodesk. The fund has engaged in discussions with Autodesk’s board regarding serious concerns about the company’s disclosures surrounding an internal investigation that ultimately led to the removal of its chief financial officer. This move comes as Starboard’s stake in Autodesk is estimated to be approximately $500 million.
One of the main issues that Starboard has raised is regarding the timing of Autodesk’s disclosure of the internal investigation. According to sources familiar with the matter, the company’s executives were found to have misled investors about its free cash flow metrics and operating margins. The investigation revealed that executives had manipulated reporting related to the company’s contract billing structure. This manipulation occurred as Autodesk transitioned from annualized payments to upfront payments to enhance its metrics.
Impact on Stock Price
Upon the disclosure of the internal investigation, Autodesk’s shares experienced a significant decline, dropping by 20% in the following weeks. As a result, the company’s market capitalization currently stands slightly below $50 billion. The delayed disclosure of the investigation raised concerns within Starboard about the company’s transparency and governance practices.
Starboard is contemplating legal action in Delaware Chancery court to push for the reopening of Autodesk’s nominating window and a postponement of the company’s upcoming annual meeting, which is scheduled for July 16. This move comes as Starboard sees potential for margin improvement and enhanced investor communications to drive Autodesk’s stock performance.
Past Activist Scrutiny and Current Probes
Autodesk has previously faced activist pressure, having settled with two activist investors in 2016 to avoid a proxy contest. Additionally, the company disclosed earlier this year that it is under investigation by the Justice Department and the Securities and Exchange Commission (SEC).
Starboard’s involvement with Autodesk underscores the growing importance of activist investors in the technology sector. The fund’s track record of challenging companies on governance and performance issues highlights the need for companies to maintain transparency and accountability in their operations.
Starboard Value’s stake in Autodesk and its concerns over the company’s disclosures serve as a reminder of the evolving landscape of shareholder activism in corporate governance. As companies face increasing scrutiny from investors, prioritizing transparency and effective communication with shareholders becomes imperative for long-term success and sustainable growth.
Leave a Reply