Elliott Management Takes Stake in Software Company F5 Networks
Activist investor spoke to the software company’s management in recent weeks about ways to boost its lagging stock
Activist investor Elliott Management Corp. has taken a stake in F5 Networks Inc. FFIV 2.50% and spoken to the software company’s management in recent weeks about ways to boost its lagging stock, according to people familiar with the matter.
The exact size of Elliott’s stake couldn’t be learned, though it falls below the 5% threshold that would require regulatory disclosure, the people said. Elliott is one of the biggest investors in F5 Networks, a Seattle company with a market value of about $8.8 billion, they added.
Founded in the mid-1990s, F5 Networks is a so-called applications-services company, working behind the scenes to make sure apps like Netflix Inc. are secure and perform smoothly.
The company’s stock has risen 3.4% since the start of the year, clawing back all the steep losses it suffered in the early stages of the coronavirus pandemic, after a strong quarterly earnings report showed accelerating software growth. Still, it is far behind a 33% climb in the tech-heavy Nasdaq Composite Index as growth has slowed and margins have declined. The stock closed Friday at $144.37, down from a high of roughly $200 in late 2018.
Among other things, Elliott managers question the company’s recent acquisitions of Shape Security Inc. and Nginx Software Inc., suggesting it may have overpaid without a clear integration strategy, the people said.
As an activist, Elliott typically takes large stakes in companies and then pushes them to get involved in deals or advocates for other moves such as stock buybacks or management shifts it believes will lift the shares.
F5 Networks, which has evolved over the years from more of a hardware company, is a fairly typical target for Elliott. Jesse Cohn, head of U.S. Equity Activism at the hedge fund, has helped lead investments in a plethora of tech companies over the years including EMC Corp., Citrix Systems Inc. and Riverbed Technology Inc.
Should there be a deal involving F5 Networks, it wouldn’t be a first for Elliott, which has helped arrange the acquisition of a number of companies it has targeted.
In the case of Riverbed Technology, the San Francisco-based network-hardware company agreed at the end of 2014 to be acquired by private-equity firm Thoma Bravo LLC after a year of pressure from Elliott. The fund firm similarly pressured EMC to sell itself, which the data-storage company ultimately did in a giant deal with Dell Technologies Inc. in 2016.