The free advice of activist investors is worth plenty to shareholders
Elliot Blair Smith | Market WatchAt 8:38 a.m. on June 11, the activist investment firm Elliott Management—run by billionaire Paul Singer—disclosed that it controlled a 7.1% interest in software vendor Citrix Systems, and wanted to meet with management to discuss its proposal to overhaul the company.
More than seven hours passed before Fort Lauderdale-based Citrix CTXS, +0.86% produced a noncommittal, one-paragraph, reply. By then the game already was on, with the stock trading up $4.42, or 7%.
About 165 activist hedge funds manage $120 billion, and produced astonishing 50% compounded returns from 2012 to 2014, according to the Alternative Investment Management Association. Singer’s Elliott Management, with $26 billion under management, is among the biggest—and most ambitious. As the firm pledged to shake up Citrix, it was also facing down Samsung Group in a South Korean court, over Samsung’s proposed, stage-managed merger of two affiliates.
In a public letter, senior portfolio manager Jesse Cohn told Citrix CEO Mark Templeton and the board of directors that Citrix could realize a share value of $90 to $100 by the end of 2016, up from the previous day’s closing price of $65.97. The path to prosperity was to slash operating costs, consolidate distribution channels and product portfolio, trim spending on “speculative R&D initiatives without clear route-to-market or tangible competitive advantage” and buy back up to 38% of its shares.
