Editor's Note: The story has been updated with a response from Autodesk spokesperson on the report.
Activist investor Starboard Value has reportedly acquired a significant stake in Autodesk Inc ADSK and is advocating for changes within the company. Autodesk’s architecture, engineering, and construction solutions include AutoCAD and Revit, their flagship product for relational building information modeling.
What Happened: Starboard Value has invested approximately $500 million in Autodesk, a design-software company. The investment firm has expressed concerns about the company’s operational strategies, corporate governance, and handling a recent accounting investigation that led to a drop in the stock price, reported to The Wall Street Journal on Sunday citing people familiar with the matter.
Starboard is urging Autodesk to enhance its profit margins and make modifications to its board. The activist investor has already met with the company’s executives to discuss these issues.
The San Francisco-based Autodesk, with a market capitalization of nearly $50 billion, has seen its shares decrease by 7% this year. The company, which provides engineering, 3D-design, and entertainment software and services, faced a significant stock drop following the revelation of an accounting probe and a delay in its annual financial report in April.
Starboard has criticized Autodesk for not disclosing the investigation and other material updates until after the company’s window for shareholders to nominate director candidates had closed in late March.
The investment firm is reportedly considering legal action to demand the reopening of Autodesk’s director-nomination window and a delay in the company’s annual shareholder meeting, currently scheduled for Jul. 16, according to the report.
“Autodesk's Board and management maintain an open dialogue with our shareholders and welcome constructive input from them. We are confident in our strategic direction, significant margin opportunity, and our corporate governance," said Autodesk's spokesperson to Benzinga‘s email request for comment on the report.
Why It Matters: The investment by Starboard Value and its subsequent push for changes at Autodesk could significantly impact the company’s future. The activist investor’s involvement often leads to substantial shifts in a company’s operations and governance, potentially influencing its stock performance and overall market position.
New York-based Starboard invests across various sectors, with a strong focus on technology, including recent initiatives at Salesforce, Wix.com, and GoDaddy. Recently, the firm, led by Jeff Smith, has also secured board seats at Algonquin Power & Utilities and Bloomin’ Brands, the parent company of Outback Steakhouse.
Starboard’s move comes amid a challenging period for Autodesk. Goldman Sachs analyst in the last week questioned Autodesk’s revenue growth and total addressable market targets. The analyst, Kash Rangan, maintained a Sell rating on Autodesk and lowered the price target from $230 to $225, citing the company’s strong competitive positioning and relative stickiness that could command operating margins north of 40% in the long term.
The company reported its first-quarter earnings of $1.87 per share, which beat the analyst consensus estimate of $1.77 by 5.65%. Additionally, a purported stockholder derivative complaint was filed in the U.S. District Court that named the directors and Chief Strategy Officer as defendants and the company as a nominal defendant.
Price Action: Autodesk Inc.’s stock closed at $225.87 on Friday, up 1.24%; in after-hours trading, the stock price remained unchanged, with a year-to-date decline of 3.52%, according to the data from Benzinga Pro.
Image Via Shutterstock
This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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