Jeffrey Smith, CEO and Chief Investment Officer of Starboard Value LP.
David Paul Morris | Bloomberg | Getty Images
Starboard Value Fund, the activist fund run by Jeff Smith, has acquired a significant stake in the graphic design company autodesk It has spoken with the company's board of directors in recent weeks about a number of serious concerns related to its disclosures about an internal investigation that led to the firing of its chief financial officer.
Starboard's stake is valued at about $500 million, according to people familiar with the matter. The activist, who has a long record of investing in the technology sector, is particularly concerned about the timing of Autodesk's disclosure of an internal investigation that revealed executives misled investors about the company's free cash flow metrics and operating margins, the people said. Who requested anonymity to freely discuss confidential information.
The results of this investigation led to the dismissal of Deborah Clifford, then Autodesk's CFO, who was moved to a different executive role within Autodesk. The investigation found that executives manipulated reports related to the company's contract billing structure, as Autodesk reverted back to upfront payments instead of annual payments, to improve those metrics.
Autodesk first revealed in April that it had begun an internal investigation into disclosure issues around those metrics, about a month after it first began the probe and told the Securities and Exchange Commission it was investigating its financial reporting. Autodesk shares fell 20% over the next few weeks. The company's market cap now stands at just under $50 billion.
The late reveal came just over a week after the deadline for director nominations closed. The narrow window and timing of the disclosure raised significant concerns within Starboard, as Autodesk's board deliberately chose not to inform shareholders before its annual meeting, the people said. Such a delay would likely limit shareholders' ability to nominate their nominees in a contested battle.
Starboard is considering legal action in Delaware Chancery Court to force it to reopen the Autodesk nomination window and delay Autodesk's annual meeting, the people said. Autodesk's shareholder meeting is currently scheduled for July 16.
The activist also believes the company can drive real margin improvement and improved investor communications to help boost Autodesk shares, the people said.
Starboard has built stakes in other big tech companies, including Salesforce and Marc Benioff's Splunk, which was sold to Cisco in 2023 for $28 billion.
The Wall Street Journal reported on Starboard's stake and plans earlier.
Autodesk has faced scrutiny from activists before. In 2016, it reached a settlement with two activist investors, Sachem Head Capital Management and Eminence Capital, to avoid proxy competition.
Autodesk revealed earlier this year that it was facing investigations from the Department of Justice and the Securities and Exchange Commission. A company representative did not immediately respond to a request for comment.
