Starboard Value, an activist fund managed by Jeff Smith, has taken a significant stake in graphics-design firm Autodesk and has been in discussions with the company’s board regarding concerns surrounding the disclosure of an internal investigation that resulted in the removal of its chief financial officer. The stake is valued at around $500 million, and Starboard is particularly worried about the timing of Autodesk’s disclosure regarding the investigation, which revealed that executives had misled investors about the company’s free cash flow metrics and operating margins. The investigation led to the removal of CFO Deborah Clifford, who was reassigned to a different executive role within the company, after it was discovered that executives had manipulated reporting related to the company’s contract billing structure to enhance those metrics.
Autodesk first revealed in April that it had initiated an internal investigation into disclosure issues concerning the metrics, nearly a month after the investigation had commenced and after informing the Securities and Exchange Commission about the probe into its financial reports. Following this disclosure, Autodesk’s shares fell by 20% in the subsequent weeks, reducing the company’s market capitalization to just under $50 billion. The delayed disclosure occurred shortly after the deadline for nominating directors closed, prompting concerns within Starboard that Autodesk’s board intentionally withheld information from shareholders before the annual meeting in an effort to limit shareholder participation in a potential contested fight. Starboard is considering taking legal action in Delaware Chancery court to urge the reopening of Autodesk’s nominating window and postpone the company’s annual meeting, currently set for July 16.
In addition to its concerns over the internal investigation and delayed disclosure, Starboard believes that Autodesk has the potential to enhance its actual margin improvement and strengthen investor communications to enhance the company’s stock performance. Starboard has previously invested in other prominent technology firms, including Salesforce and Splunk, which was acquired by Cisco for $28 billion in 2023. The activist fund’s involvement with Autodesk has been reported by the Wall Street Journal, and the company has previously faced activist pressure in 2016, when it reached a settlement with two activist investors to avoid a proxy contest. Autodesk also disclosed earlier in the year that it is under investigation by the Justice Department and SEC.
Overall, Starboard Value’s actions and concerns regarding Autodesk’s internal investigation, delayed disclosure, and shareholder participation reflect the activist fund’s commitment to advocating for changes in the company’s operations and governance to enhance shareholder value. The situation highlights the importance of transparent disclosure and effective communication with investors in maintaining trust and credibility in the financial markets. Autodesk’s response to Starboard’s engagement and potential legal action, as well as any further developments in the ongoing investigations by regulatory authorities, will be pivotal in shaping the company’s future direction and relationship with its investors.
