Monday was quite a day for the folks at Jeffrey Smith’s Starboard Value L.P.
One of the activist hedge fund’s known positions jumped in price following news that it would be acquired, while another major investment surged in price after the activist hedge fund disclosed its position.
In the case of the former, the position was Envision Healthcare. The healthcare staffing company’s shares jumped 2.3 percent after it agreed to be acquired by private equity giant KKR for $9.9 billion.
Starboard had boosted its stake in Envision by more than 50 percent to 3.9 million shares during the first quarter, making the healthcare company the hedge fund’s ninth largest long position, according to a regulatory filing.
There is no indication that Starboard played a role in facilitating a deal. Back in the fall, Smith told a conference that Envision could dramatically improve its performance and could be a target for a private equity firm.
Interestingly, KKR owned more than 2.8 million shares in the first quarter, according to a regulatory filing.
In addition, another activist – Keith Meister’s Corvex Management – unloaded more than 90 percent of its stake in the first quarter, according to a filing.
Also on Monday, shares of Web.com surged 11.4 percent after Starboard disclosed it owned 9.5 percent of the company, which helps customers develop internet strategies.
Starboard, which managed about $5.3 billion at year-end, is now the web development company’s third largest shareholder. The largest shareholder is hedge fund Okumus Fund Management.
In a regulatory filing, Starboard used typical boilerplate language, asserting the shares are undervalued and are an attractive investment opportunity. It added that it may in the future take some sort of undefined action.
In response, the company said in a statement that Web.com “welcomes open communication with its shareholders and values any input and suggestions that may advance its goal of enhancing shareholder value. We expect to engage in a constructive dialogue with Starboard moving forward.”
Smith did not respond to several requests for comment.
Web.com is smaller than Starboard’s typical targets. Before the stock’s surge on Monday, its market capitalization was below $1 billion.
At the end of April, Web.com’s stock was 27 percent below its early January high.
After dropping 1.5 percent on Tuesday to $23.10, it is down about 37 percent from its all-time high on February 1, 2014.
Last month, Web.com named a new chief financial officer, Jennifer Lada, succeeding Kevin Carney, who had been with the company for 20 years.
If Starboard’s past is any indication, look for it to soon publicly make the case for the company to dramatically improve its cash flow and to seek an acquirer.
As is common these days when activists take stakes in new targets, Starboard did not telegraph its move in its first quarter 13F filing, which was made public in mid-May.
Instead, the hedge fund firm’s initial disclose of the stake came in the 13D filing made public Friday evening, well after the stock market closed for official trading.
