Starboard Value, the activist fund managed by Jeff Smith, has recently acquired a significant stake in graphics-design company Autodesk and has engaged in discussions with the company’s board regarding various concerns. One of the primary issues revolves around an internal investigation conducted by Autodesk, which resulted in the removal of its chief financial officer. Starboard’s stake in Autodesk is estimated to be around $500 million, highlighting the substantial interest the activist fund has in the company.
One of the key concerns raised by Starboard Value is the timing of Autodesk’s disclosure of the internal investigation findings. The investigation revealed that executives at Autodesk had provided misleading information to investors regarding the company’s free cash flow metrics and operating margins. This lack of transparency resulted in the ouster of the then-CFO, Deborah Clifford, who was reassigned to a different role within the company. The investigation also uncovered manipulation in reporting related to Autodesk’s contract billing structure, as the company made the strategic shift from annualized payments to upfront payments.
Autodesk’s delayed disclosure of the internal investigation had a significant impact on its stock price, causing shares to decline by 20% in the weeks that followed. The market cap of the company now stands just below $50 billion, reflecting the concerns raised by investors regarding the lack of transparency and governance within Autodesk. The delayed disclosure also coincided with the closing of the deadline to nominate directors, which has raised suspicions within Starboard Value that Autodesk’s board deliberately withheld information from shareholders to limit their ability to participate in the nomination process.
In response to these concerns, Starboard Value is considering taking legal action in Delaware Chancery court to compel the reopening of Autodesk’s nominating window and delay the company’s annual meeting, which is currently scheduled for July 16. The activist fund believes that such actions are necessary to ensure that shareholders have the opportunity to nominate their own candidates in a contested fight. Starboard also sees potential for Autodesk to drive actual margin improvement and enhance investor communications to boost the company’s stock performance.
Autodesk has faced activist pressure in the past, reaching settlements with activist investors in 2016 to avoid a proxy contest. The company has also disclosed that it is currently under investigation by the Justice Department and the SEC, adding further complexity to its governance and regulatory compliance issues. Starboard Value’s involvement in Autodesk highlights the ongoing challenges facing the company and underscores the importance of effective governance and transparency in managing investor relations.
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