Good ship Quantum turns to Starboard, fires a few ranging shots
Responds to SEC filing across its bows
Tape storage vendor Quantum has agreed to meet with Starboard Value, the activist investor that has sprung onto the scene claiming to be Quantum's largest shareholder - to the tune of 16 per cent - and wanting to prod the company into raising shareholder value.
We wrote about this here, and Quantum has issued a statement which reads:
As of Nov. 1, Starboard Value reported that it had purchased approximately 23 million shares of Quantum common stock. This represents just under 10 per vent of Quantum’s total outstanding shares and is comparable in size to the common stock holdings of some other large shareholders. (The other 5.9 per cent ownership share Starboard reported is based on assumed conversion of convertible debt the firm holds, if and when it were converted to stock at the end of 5 years).
According to its SEC filing, Starboard made these purchases because it believed Quantum's stock was undervalued and represented an attractive investment opportunity. The filing also said Starboard intends to engage in discussions with Quantum management and Board about ways to increase profitability and unlock shareholder value, as well as seek Board representation.
Quantum has not yet had any discussions with Starboard on these topics but, at the firm’s request, has agreed to meet in the coming weeks. (As with any shareholder discussions, Quantum must comply with SEC regulations prohibiting the sharing of financially material information that is not already public.)
Beyond this, Quantum has no further comment.
We can glean from this that hedge fund Starboard has not yet talked to Quantum's management - so presumably its activities thus far are hostile. It is knocking on the Quantum boardroom door, wanting admittance to the directors' table based on its holdings in debt and shares, and hoping to tell the other directors how to run the company better.
We might imagine a meeting in the "coming weeks" means before the end of the year, if not the end of November. Quantum shares are now up to $1.37, having climbed from $1.05 last week as investors gamble that Starboard's arrival on the scene will galvanise Quantum into cost-cutting and/or asset sell-off, which in turn will increase profitability - thus pushing the share price up further.
If Quantum plays nicely with Starboard we will eventually have a statement about welcome Starboard's contribution is. If not, we can look forward to complaints from Starboard about how unreasonable Quantum's management is being. Watch this space. ®