Jeffrey Smith, CEO and Chief Investment Officer at Starboard Value LP.
David Paul Morris | Bloomberg | Getty Images
Starboard Value, the activist fund run by Jeff Smith, has taken a significant stake in a graphic design company Autodesk and has spoken to the company’s board in recent weeks about a number of serious concerns surrounding disclosures related to an internal investigation that led to the ouster of its chief financial officer.
Starboard’s stake is valued at about $500 million, according to people familiar with the matter. The activist, who has a long track record of investing in the technology sector, is particularly concerned about the timing of Autodesk’s disclosure of an internal investigation that found executives misled investors about the company’s free cash flow metrics and operating margins have, the people said. requested anonymity in order to freely discuss confidential information.
The results of this investigation led to the ouster of Autodesk’s then CFO, Deborah Clifford, who moved to another executive position at Autodesk. The investigation found that when Autodesk switched from annual payments back to upfront payments, executives manipulated reports tied to the company’s contract billing structure to improve those metrics.
Autodesk first announced in April that it had opened an internal investigation into disclosure issues related to these metrics, nearly a month after it first began the investigation and informed the Securities and Exchange Commission that it was reviewing its financial reports. Autodesk shares plunged 20% over the next few weeks. The company’s market capitalization is currently just under $50 billion.
The late disclosure came just over a week after the deadline for director nominations. The tight time frame and timing of disclosure had raised significant concerns at Starboard, it said. Autodesk’s board of directors made a conscious decision not to inform shareholders before the annual general meeting. Such a delay would potentially limit a shareholder’s ability to nominate its own candidates in a contentious battle.
Starboard is considering legal action in Delaware chancery court to force the reopening of Autodesk’s nomination window and the postponement of Autodesk’s annual meeting, the people said. Autodesk’s shareholder meeting is currently scheduled for July 16.
The activist also believes the company can drive real margin improvement and improve investor communications to help strengthen Autodesk stock, the people said.
Starboard has built stakes in other major technology companies, including Marc Benioff’s Salesforce and Splunk, which sold to Cisco for $28 billion in 2023.
The Wall Street Journal previously reported on Starboard’s involvement and plans.
Autodesk has come under scrutiny from activists before. In 2016, the company reached an agreement with two activist investors at Sachem Head Capital Management and Eminence Capital to avert proxy competition.
Autodesk announced earlier this year that it was facing investigations by the Department of Justice and the U.S. Securities and Exchange Commission (SEC). A company representative did not immediately respond to a request for comment.
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2024-06-17 01:51:34
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