It was disclosed in a new filing with the SEC that Paul Singer’s Elliott Management has taken a 5.0% activist position in Informatica Corporation (NASDAQ:INFA), obtaining 5.45 million shares in the Redwood City, California enterprise software company. Elliott also has economic exposure to an additional 3.0% of Informatica’s common stock through derivative agreements in form of cash settled swaps.
The 13D filing represents a new position for Elliott, activist hedge fund founded in 1977, which stands as one of the oldest operating under continuous management to this day. In the filing, the investor expressed the belief that Informatica Corporation (NASDAQ:INFA)’s stock is severely undervalued, and stated that they had already begun discussions with Informatica’s management and board of directors on how best to maximize shareholder value.
Neither of those outcomes would be a surprise, as Elliott has built a reputation over the years for investing in companies (especially those in the technology sector) and seeking their sale or privatization afterwards, all of which raises the spectre of such an event transpiring with Informatica; and unconfirmed rumors suggest Elliott may very well encourage them to pursue one or both of those scenarios.
In one of their most recent deals, Elliott Management spearheaded the eventual sale of Compuware Corporation (NASDAQ:CPWR) to the private equity firm Thoma Bravo LLC for $2.5 billion, after making their own offer for the company at one point, which was rejected. Compuware shareholders ended up receiving $10.92 per share from that sale, a premium of 17% on the company’s August 29 closing price. They similarly built a strong stake in Riverbed Technology, Inc. (NASDAQ:RVBD) and unsuccessfully offered to purchase that company as well, before brokering their buyout for $3.6 billion in October.
A few months before that, Elliott built a 6.7% stake in Interpublic Group of Companies Inc. (NYSE:IPG) and eventually pushed them to sell themselves, though a combination of IGC resistance and few obvious buyers at the time conspired to prevent a sale. Elliott maintains their activist position in IGC, and it’s expected they will nominate their own members for the company’s board over the next few weeks.
Analysts would seem to disagree however on the value of Informatica Corporation (NASDAQ:INFA). Credit Suisse has downgraded them from a price target of $52.00 a year ago, to $35.00 today. They suggest that Informatica faces several potential risks, including the release of open-source software that could cut into their subscription numbers, slowing growth, and less incentive for management to try and maximize shareholder value due to active insider selling. According to our insider sales tracker, Informatica had 148 insider sales during 2014, the majority of them by President and CEO Sohai Abbasi.
Likewise, Wedbush Securities initiated coverage of Informatica on Monday and only rated them a hold, with a $37.00 price target. Analysts at RBC Capital gave them a $38.00 price target on January 7, while Barclays raised their price target to $39.00 from $34.00. However even in the latter case, that was still well under the stock’s current price of over $42.00.
TheStreet was a little more positive in their assessment on January 15 however, upgrading their rating to “Buy”, and opining that strong income and revenue growth, coupled with zero debt and expected earnings per share that would be vastly improved next year, made for an intriguing stock.
Informatica Corporation (NASDAQ:INFA) was one of the popular stocks during the third quarter among the hedge funds we track at Insider Monkey, with 17 funds disclosing new positions, while another 17 raised their exposure (several of them by multiples of their previous amounts). On the other hand, just five funds trimmed their exposure to the stock, and not a single fund sold out its entire stake.
The funds that we track seem to had it right, as Informatica has gained over 33% since its 52-week low in late July. However that rise has also contributed to making it not quite as attractive a stock as it was then. However, since the stock is a more likely target for a sale now given Elliott’s involvement, there still might be opportunities to invest.
Other funds with positions in Informatica and their amounts as of September 30 include Matt Sirovich and Jeremy Mindich’s Scopia Capital with 6.01 million shares, Eric Bannasch’s Cadian Capital with 3.04 millions shares, and Douglas Dossey and Arthur Young’s Tensile Capital with 1.24 million shares.
Disclosure: None
