Activist Starboard Increases Autodesk Stake, Considers Lawsuit over Delayed Probe Disclosure

Starboard Value, the activist fund run by Jeff Smith, has recently taken a significant stake in graphics-design firm Autodesk. This move comes as Starboard has expressed serious concerns to Autodesk’s board regarding the company’s disclosures about an internal investigation that led to the removal of its chief financial officer, Deborah Clifford. The stake, valued at approximately $500 million, reflects Starboard’s long-standing interest in the technology sector. Specifically, the activist fund is troubled by the timing of Autodesk’s disclosure of the internal investigation findings, which revealed that executives had misled investors about the company’s free cash flow metrics and operating margins by manipulating reporting tied to its contract billing structure.

The internal investigation at Autodesk, which began in April, found that executives had manipulated reporting related to the company’s contract billing structure as it shifted back to upfront payments from annualized payments to improve metrics. Following the probe, Deborah Clifford was moved to a different executive role within the company. The delayed disclosure of the investigation’s findings by Autodesk had significant repercussions on the company’s stock price, with shares falling by 20% in the weeks following the disclosure. With a market capitalization sitting just below $50 billion, Autodesk faces further challenges as Starboard considers legal action in Delaware Chancery court to reopen the nominating window and delay the annual meeting scheduled for July 16. This move is fueled by concerns that Autodesk’s board may have intentionally withheld information from shareholders to limit their ability to nominate directors in a contested fight.

Starboard believes that Autodesk has the potential to drive actual margin improvement and enhance investor communications, which could in turn bolster the company’s stock performance, according to sources familiar with the matter. The activist fund has a track record of building stakes in major technology companies, including Salesforce and Splunk. The news of Starboard’s stake in Autodesk and its potential legal action was first reported by the Wall Street Journal. This is not the first time Autodesk has faced activist scrutiny, as it previously settled with activist investors in 2016 to prevent a proxy contest. In addition to the internal investigation, Autodesk is also under scrutiny from the Justice Department and SEC. A representative for the company has not yet responded to requests for comment.

In conclusion, Starboard Value’s involvement with Autodesk reflects its ongoing commitment to driving positive change and value creation in the technology sector. The activist fund’s concerns about Autodesk’s disclosure practices and executive accountability highlight the importance of transparency and ethical leadership in corporate governance. As the situation unfolds, stakeholders will be closely monitoring the outcomes of Starboard’s potential legal action and the impact it may have on Autodesk’s future operations and shareholder relationships. With the evolution of corporate activism in the technology industry, it is imperative for companies like Autodesk to address governance issues proactively and strive for sustainable growth and long-term success.