Starboard Value, the activist fund led by Jeff Smith, recently acquired a significant stake in graphics-design firm Autodesk. The fund has engaged in discussions with the company’s board regarding various serious concerns related to its disclosures concerning an internal investigation that ultimately led to the removal of its CFO.
The internal investigation carried out by Autodesk discovered that executives had misled investors regarding the company’s free cash flow metrics and operating margins. This manipulation of reporting was tied to the company’s contract billing structure, as Autodesk transitioned from annualized payments to upfront payments to inflate these metrics. The probe’s findings resulted in the removal of the CFO, Deborah Clifford, who was subsequently reassigned within the company.
Following the revelation of the internal investigation, Autodesk’s shares experienced a 20% decline, reducing the company’s market cap to below $50 billion. Starboard Value expressed apprehension over the timing of Autodesk’s disclosure, which occurred shortly after the deadline for director nominations had passed. This raised suspicions that the board deliberately withheld crucial information from shareholders before the annual meeting to limit their ability to nominate candidates in a contested fight.
In response to these concerns, it has been reported that Starboard Value is contemplating legal action in Delaware Chancery court to compel the reopening of Autodesk’s director nominating window and postpone the annual meeting scheduled for July 16. The activist fund believes that proper margin enhancement and enhanced investor communication can help elevate Autodesk’s stock performance.
Autodesk has encountered activist investor scrutiny in the past, having settled with two activist investors in 2016 to prevent a proxy contest. Additionally, the company disclosed ongoing probes by the Justice Department and SEC earlier this year, indicating further regulatory pressure.
Starboard Value’s intervention in Autodesk raises significant concerns about the company’s governance, transparency, and investor relations practices. The allegations of misleading disclosures and executive misconduct highlight the importance of robust corporate oversight and accountability. As the situation unfolds, stakeholders will closely monitor the outcomes of Starboard Value’s potential legal action and the company’s response to the activist fund’s demands.