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Starboard Value LP, owns more than $500 million in Autodesk (NASDAQ:ADSK), appealed to the company’s board of directors in a letter to shareholders on Monday.
The investor group said the board had “manipulated the machinery of the company and permanently entrenched the company’s position”. The scheme was constituted by a failure to disclose material misconduct regarding the company’s accounting and disclosure practices prior to the deadline for nominating director candidates for election at the 2024 Annual Meeting of Shareholders.
Autodesk up 5% Market trends in early trading on Monday after the news was disclosed.
“We have great respect for Autodesk, which has been a pioneer and leader in design software for the past four decades,” Starboard said in the letter.
The group added: “We also believe that Autodesk has the opportunity to create significant shareholder value by significantly improving growth and profitability through materially higher margins, adopting more shareholder-friendly capital allocation policies, and improving governance and oversight. .
Starboard noted that an audit committee investigation uncovered issues related to accounting and disclosure practices and executive compensation procedures. It also found that the board allegedly “chose to withhold material information from shareholders prior to the nomination deadline in order to maintain the status quo and insulate current directors from potential shareholder challenges.”
Starboard has called for a shake-up of the company’s board of directors and filed a lawsuit in the Delaware Chancery Court to postpone Autodesk’s 2024 annual meeting.
Starboard noted that the findings indicate that Autodesk did not switch to an annual billing process for its large enterprise customers and continued to use multi-year prepayments, despite telling shareholders otherwise. This was allegedly done to artificially inflate reported free cash flow.
