In brief
Jeff Smith’s activist fund, Starboard Value, has taken a significant stake in Autodesk, a graphics-design firm, over concerns about its internal investigation that led to the ouster of its CFO. Starboard’s stake is valued at around $500 million. The activist is concerned about the timing of Autodesk’s disclosure of an internal investigation that revealed executives misled investors about the company’s free cash flow metrics and operating margins. The results of the probe led to the ouster of Autodesk’s then-CFO, Deborah Clifford. Starboard is weighing legal action in Delaware Chancery Court to compel the reopening of Autodesk’s nomination window and the delay of Autodesk’s annual meeting. Autodesk has faced activist scrutiny before, and the company is currently facing Justice Department and SEC probes.
Jeff Smith’s activist fund, Starboard Value, has acquired a sizeable stake in the graphics design company Autodesk. In recent weeks, the board of the company has been consulted regarding several grave concerns regarding the company’s disclosures regarding an internal investigation that resulted in the removal of the chief financial officer.
According to those familiar with the situation, Starboard’s investment is estimated to be worth $500 million. The people, who asked to remain anonymous in order to discuss sensitive information freely, said that the activist, who has a long history of investing in the technology industry, is especially concerned about the timing of Autodesk’s disclosure of an internal investigation that found executives had misled investors about the company’s free cash flow metrics and operating margins.
Deborah Clifford, Autodesk’s former CFO, was fired as a result of the investigation’s findings and was given a new executive position within the company. As Autodesk returned to upfront payments from annualised payments, the investigation discovered that executives had falsified reporting related to the company’s contract billing structure in order to boost those metrics.
About a month after starting the inquiry and notifying the Securities and Exchange Commission that it was looking into its financial reports, Autodesk first revealed in April that it had started an internal probe into disclosure problems surrounding those metrics. The following few weeks saw a 20% decline in Autodesk shares. Currently, the market value of the corporation is about $50 billion.
A little over a week after the director nomination period had ended, the information was finally disclosed. The people said that there are serious concerns within Starboard due to the limited window and timing of the disclosure, and that Autodesk’s board purposefully decided not to notify shareholders prior to its annual meeting. Such a delay might restrict a shareholder’s ability to nominate its own candidates in a competitive race.
According to the person, Starboard is considering filing a lawsuit in Delaware Chancery Court to force Autodesk to postpone its annual meeting and reopen its nomination window. The current date of Autodesk’s shareholder meeting is July 16.
According to the people, the activist also thinks that the business can boost investor communications and achieve real margin improvement to support Autodesk’s price.
Marc Benioff’s Salesforce and Splunk, which Cisco reportedly acquired in 2023 for a reported $28 billion, are just two of the notable IT companies in which Starboard has invested.
The Wall Street Journal has previously reported on Starboard’s objectives and shareholding.
Activists have previously examined Autodesk. To avoid a proxy fight, it reached a settlement with two activist investors, Sachem Head Capital Management and Eminence Capital, in 2016.
Autodesk said earlier this year that the SEC and Justice Department are looking into the company. A request for comment from a corporate spokesperson was not immediately answered.
Source : CNBC News
