Jeffrey Smith, CEO and Chief Investment Officer at Starboard Value LP.
David Paul Morris | Bloomberg | Getty Images
Starboard Value, Jeff Smith’s activist fund, has taken a significant stake in a graphic design firm Autodesk and has spoken to the company’s board in recent weeks about a number of serious concerns surrounding the revelations about an internal investigation that led to the ouster of the chief financial officer.
Starboard’s stake is estimated at about $500 million, according to people familiar with the matter. The activist, who 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 that found executives misled investors regarding the company’s free cash flow figures and operating margins company, people said. who requested anonymity in order to discuss confidential information freely.
The results of that investigation led to the resignation of Autodesk’s then CFO, Deborah Clifford, who was moved to another executive role within Autodesk. The investigation found that executives manipulated reporting related to the company’s billing structure, while Autodesk shifted from annualized payments to prepayments to improve those numbers.
Autodesk first announced in April that it had begun an internal investigation into disclosure issues surrounding these metrics, nearly a month after it first began the investigation and informed the Securities and Exchange Commission that it was examining its financial reports. Autodesk shares fell 20% over the next few weeks. The company’s market capitalization is now just under $50 billion.
The delayed disclosure came just over a week after the deadline for nominating directors passed. The tight timeframe and timing of the disclosure have raised significant concerns within Starboard, the people said, that Autodesk’s board made a conscious decision not to inform shareholders ahead of the annual meeting. Such a delay would potentially limit a shareholder’s ability to nominate its own candidates in a contentious contest.
Starboard is considering legal action in Delaware Chancery court to force the reopening of Autodesk’s nomination period and the delay of Autodesk’s annual meeting, the people said. Autodesk’s shareholder meeting is currently scheduled for July 16.
The activist also believes the company can deliver real margin improvement and improve communications with investors to strengthen Autodesk’s stock, the people said.
Starboard has built stakes in other major tech companies, including Salesforce and Marc Benioff’s Splunk, which was sold to Cisco for $28 billion in 2023.
News of Starboard’s commitment and plans was previously reported by the Wall Street Journal.
Autodesk has faced activist criticism before. In 2016 it is settlement with two activist investors at Sachem Head Capital Management and Eminence Capital to avoid a proxy match.
Autodesk announced earlier this year that it is facing investigations from the Department of Justice and the SEC. A company representative did not immediately return a request for comment.
