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Morning Brief: Elliott Threatens Proxy Fight with Commvault

The multistrategy firm says the data software company is undervalued and that the company requires “fundamental change.”

  • By Stephen Taub

Elliott Associates disclosed a new activist target. The multistrategy firm said it owns 7.4 percent of the shares of Commvault Systems and has a combined economic exposure of 10.3 percent of the data software company. The hedge fund also nominated four individuals to the company’s board of directors. This is the latest among a long line of tech companies Elliott has targeted in recent years.

In a regulatory filing, Elliott said the stock is undervalued and represents an attractive investment opportunity but that the company “requires fundamental change.” Elliott thinks it can significantly improve the company’s shareholder value through operational initiatives, capital allocation changes, and enhanced management and board of directors, according to the filing.

“We have deep experience as software investors, and our track record in technology is one of partnering with management teams and boards to find mutually supported paths to value creation,” Elliott told Commvault’s board in a detailed, lengthy letter, adding, “we have spent considerable time in the company’s sector.” It pointed out as examples that it was recently a large shareholder of Symantec and conducted “deep diligence” on Veritas. “We have studied Commvault for several years and have a strong appreciation for and understanding of the company’s history and challenges,” Elliott added.

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Many of the most popular hedge fund stocks suffered some of the biggest losses on Monday, when the overall stock market tanked amid fears of a widening trade war and protectionism. Investors are also concerned that President Trump may launch an economic war with one of the most successful internet companies, Amazon.com, whose founder privately owns The Washington Post, which has published critical reports of the current administration. Pro-business and free market advocates are also concerned the Trump administration may block the planned merger between AT&T and Time Warner because President Trump does not like the reporting of Time Warner unit CNN.

Shares of Amazon.com dropped 5.2 percent, to close at $1,371.99. They are now down nearly 12 percent in just the past four trading sessions. Shares of streaming video giant Netflix fell 5.10 percent, to close at $280.29. Snap, the social media company, fell about 8.9 percent, to $14.46, and is now trading about 15 percent below its initial public offering (IPO) price. These and other popular internet stocks are also heavily shorted stocks.

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Kingdon Capital Management cut its stake in AIT Therapeutics by roughly 20 percent, to 4.77 percent of the biopharmaceutical company.

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