Starboard Value, the activist fund run by Jeff Smith, has taken a sizable stake in graphics-design firm Autodesk. The activist has spoken with the company’s board in recent weeks over a number of serious concerns involving its disclosures around an internal investigation that led to the ouster of its chief financial officer.
Activist Starboard Value bought a roughly $500 million stake in Autodesk, and is pushing for changes at the design-software maker. Starboard thinks the company should improve its margins and make changes to its board.
Starboard’s Autodesk stake
Starboard’s stake is valued at roughly $500 million, according to people familiar with the matter. The activist, which 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. The investigation revealed that executives misled investors around the company’s free cash flow metrics and operating margins, said the people, who requested anonymity to discuss confidential information freely.
Autodesk investigation
The results of the investigation led to the Autodesk’s then-CFO, Deborah Clifford, getting ousted and being moved to a different executive role within the company. The probe found that executives manipulated reporting tied to company’s contract billing structure, as Autodesk shifted back to upfront payments from annualized payments, to improve those metrics.
Autodesk’s disclose of probe
Autodesk first disclosed in April that it had begun an internal investigation into disclosure issues around those metrics, almost a month after it had first begun the investigation and had informed the Securities and Exchange Commission that it was probing its financial reports. Shares of Autodesk slid 20% over the next few weeks. The company’s market cap now sits slightly below $50 billion.
Starboard’s concern
The delayed disclosure came a little more than a week after the deadline to nominate directors closed. The tight window and timing of the disclosure has raised significant concerns inside Starboard. The people close o the matter said, that Autodesk’s board deliberately chose not to inform shareholders ahead of its annual meeting. Such a delay would potentially limit a shareholder’s ability to nominate its own candidates in a contested fight.
Starboard lawsuit
As per sources, Starboard is weighing a lawsuit in Delaware Chancery court to compel the reopening of Autodesk’s nominating window and the delay of Autodesk’s annual meeting. Autodesk’s shareholder meeting is currently scheduled for July 16.
The activist also believes that the company can drive actual margin improvement and improve investor communications to help bolster Autodesk’s stock, the people said.
Starboard stakes in tech companies
Starboard has built stakes in other major technology companies, including Marc Benioff’s Salesforce and Splunk, which was sold to Cisco in 2023 for $28 billion.
News of Starboard’s stake and plans was reported earlier by the Wall Street Journal.
Autodesk’s previous scrutiny
Autodesk has faced activist scrutiny before. In 2016, it settled with two activist investors. They were of Sachem Head Capital Management and Eminence Capital to stave off a proxy contest.
Autodesk disclosed earlier this year that it is facing Justice Department and SEC probes. A representative for the company did not immediately return a request for comment.
