2017-12-18 10:58:14 | Akamai surges as Elliott Management takes stake, calling shares 'undervalued'Shares of Akamai Technologies (AKAM) are rising after Paul Singer's activist fund Elliott Management disclosed a stake in the company. ELLIOTT TAKES STAKE: In a regulatory filing released on Friday, Elliott disclosed a 6.5% stake in Akamai and said shares are "significantly undervalued and represent an attractive investment opportunity." The hedge fund said Akamai "possesses an unmatched network platform which provides a significant competitive advantage in its ability to deliver, accelerate, optimize and secure global traffic and business applications over the internet" and it "believes that there are numerous operational and strategic opportunities to maximize shareholder value." Elliott added that it will seek to engage in talks with Akamai's board of directors and management regarding operational and strategic matters and intends to communicate with other shareholders including potential suitors, service providers and financing sources. WHAT'S NOTABLE: Sources familiar with the matter told Reuters that Elliott will look to curb "wasteful spending" and "poor strategic planning when it comes to expanding to new markets." An Akamai spokesman told Reuters that "We appreciate the views of all our stockholders and we value constructive input toward the common goal of enhancing stockholder value." ANALYST REACTION: Credit Suisse analyst Brad Zelnick upgraded Akamai to Outperform from Neutral this morning and raised his price target on shares to $75 from $55. In a note to clients, Zelnick said Akamai is "a unique asset with tremendous strategic value" and Elliott's disclosure represents a catalyst that could unlock value. The analyst said he believes the news ramps up the potential for a strategic review, including a full or partial sale, a restructuring of the company's portfolio, a review of management incentives and a capital structure review. Oppenheimer analyst Timothy Horan also raised his price target for Akamai, to $80 from $60, after Elliott announced its stake. Horan said he believes Akamai is "a perfect activist target" as management has allowed margins and revenues to drop and could use Elliott's help on execution. The analyst added that he thinks that Akamai is "an extremely attractive acquisition target" given its distinct, cloud edge-based security capabilities and he expects Elliott will look to sell the company or change management. Horan, who noted that Elliott "has a strong track record of working with management teams" to improve performance over the long-term, reiterated an Outperform rating on the shares. PRICE ACTION: Shares of Akamai jumped 14.9%, or $8.61, to $65.31 in morning trading. |
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