Bengaluru: Activist investor Elliott Management Corp disclosed a stake of “more than 4%” in Cognizant Technology Solutions and urged the IT services provider to consider shaking up its board as one of several steps to boost shareholder value.
Shares of the company, which disclosed in September that it was investigating possible violations of US anti-corruption laws, rose 10.4% to $58.87 in early trading. Up to Friday’s close, the stock had fallen 11% this year.
“We believe that Cognizant can achieve a value of $80–$90+ per share by the end of 2017, representing upside of 50-69% in just over a year,” Elliott senior portfolio manager Jesse Cohn said in a letter to Cognizant’s board on Monday.
Elliott Management has led several successful campaigns to squeeze value out of companies it considers to be undervalued.
Qlik Technologies, Riverbed, Informatica and Compuware sold themselves to private equity firms after Elliott invested.
Elliott said Teaneck, New Jersey-based Cognizant should consider a $2.5 billion share buyback, acquisitions and initiate a dividend, among other measures to boost its shares.
The hedge fund also sought changes to Cognizant’s board, saying that more than half of the company’s directors had been in their position for at least nine years.
“... Given the sustained share price underperformance at Cognizant, we believe directors with new experiences, skills and perspectives would be welcome,” Elliott said.
Cognizant said earlier this month that some senior managers may have participated in or failed to take action to prevent making “potentially improper payments”.
The disclosure hit the company’s shares but they have since recouped most of the losses.
Elliott is also pressing Samsung Electronics Co Ltd to restructure and is urging Mentor Graphics Corp to pursue “strategic opportunities.” Reuters