Plenty of Upside Ahead as Activist Investor Enters This Beaten-Down Tech Stock
Shares of Wix.com (NASDAQ: WIX) have fallen sharply from their 52-week high, but shareholders received some interesting news this week as Starboard Value has taken a 9% stake in the company. Shares rose 15.7% on Monday based on news of the prominent activist investor revealing its position. Here's why Starboard's involvement is a positive development for Wix shareholders and why there could be even more upside ahead.
Activist investors are investment firms that take large stakes in companies and then use their influence to push for changes that they believe will help to propel shares higher, such as ideas for cutting costs, changes to senior management, and increasing returns to shareholders. In the past, activists and management teams often had adversarial relationships, but nowadays, though there are still some acrimonious situations, many management teams are taking a more collaborative approach and working with activists to try to unlock value.
Starboard Value is one of the best-known activist investors in the game, and the fund had tremendous success with its investment in Darden Restaurants, the parent company of Olive Garden and LongHorn Steakhouse, several years ago. Starboard was so fastidious in its activist campaign at Darden that it famously (or perhaps infamously) pushed Olive Garden to change the cadence at which wait staff brought out free breadsticks and to add salt to the water it used for cooking pasta. Laugh if you want, but the investment was a tremendous success for Starboard as shares gained about 50% in the 18 months following its involvement.
Source Fool.com
