GoDaddy (NYSE:GDDY) stock is rallying this morning after Starboard Value, a hedge fund that’s known as an activist investor, disclosed that it had obtained a 6.5% stake in GoDaddy.
Starboard’s stake, which was valued at about $800 million shortly after the market opened today, was reported in a regulatory filing by the hedge fund. Starboard reportedly intends to coax GoDaddy into adopting strategies that the hedge fund thinks will improve the company’s financial results.
GDDY Stock Pops on Starboard Strategy
So what is significant about the Starboard news? Well, the hedge fund often attempts to obtain seats on companies’ boards using settlements with firms that it’s targeting.
In 2019, for example, the hedge fund obtained 20 board seats at seven companies. Between 2013 and October 2020, it received 118 board positions, reported CNBC.
The activist investor generally pushes firms to make significant changes, such as hiring a new CEO or selling major businesses. Its goal is generally to increase its targets’ “profit margin or improve [their] performance in other ways,” The Wall Street Journal noted today.
GDDY stock is likely climbing significantly in morning trading because investors believe that Starboard will be able to improve GoDaddy’s financial results.
Starboard’s Mixed Track Record
In recent years, the hedge fund has had multiple successes and a number of failures. In 2018, the fund disclosed that it had acquired a 9.4% stake in Web.com, which helps its customers design and market their websites. On the first trading day after the news, Web.com’s shares closed at $23.45. In the following month, Web.com was taken private for $25 per share.
In September 2019, Starboard disclosed a stake in computer data storage company Box (NYSE:BOX). Since then, the shares have climbed over 50%.
But Starboard’s targets don’t always generate positive returns. CNBC highlighted that both Comscore (NASDAQ:SCOR) and Depomed tumbled sharply between the times at which Starboard obtained seats on the companies’ boards and February 2020. Depomed is now known as Assertio Holdings (NASDAQ:ASRT) .
Today, however, most investors seem very optimistic about Starboard’s chances of boosting GoDaddy stock.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
