Activist Investor Causes GoDaddy Stock to Soar

December 28, 2021 07:30

The last week of 2021 got off to a strong start on Wall Street yesterday, with the S&P 500 climbing 1.2% to close the session at an all-time high. Over the last four sessions, the index has gained 4.3%, as it looks to end the year in style.

Energy and tech stocks were largely to thank for yesterday’s gains, with both sectors enjoying strong sessions. Amongst the day’s biggest losers were cruise stocks, many of which dropped after reports of a third Florida-based cruise ship having multiple passengers test positive for Covid-19 over the weekend.

However, one of the most interesting stories of the day came from a company which is not part of the S&P 500.

Yesterday, the share price of domain registration site GoDaddy soared 8.4%, as news emerged that a major investor had acquired a considerable position in the company.

Activist investor Starboard Value reported yesterday that it had acquired a stake of around 6.5% in GoDaddy, stating in their filing with the US Securities and Exchange Commission (SEC) that the shares were undervalued.

When activist investors purchase a significant stake in a company, they often begin to agitate for change within that company, in an attempt to maximise shareholder value.

Starboard Value has a proven track record of profitable activist campaigns. For example, after acquiring a stake in AOL in 2011, amongst other things, Starboard called on CEO Tim Armstrong to return to shareholders the $1 billion it had received from selling patents to Microsoft. Armstrong eventually took the advice, returning the money and causing the AOL share price to increase considerably.

Amongst other successful campaigns was the takeover of Darden Restaurants, a company which owns several successful US restaurant chains such as Olive Garden. After acquiring a stake of less than 10% in the company, Starboard won over fellow shareholders and successfully managed to replace the entire board of directors, with Starboard CEO Jeffrey Smith being made chairman. Following this revolution, Darden Restaurant's share price went on to rise almost 60%.

Whilst we don’t yet know what Starboard’s plans are for GoDaddy, speculation is abound that they plan to push the company to improve its performance. Given Starboard’s reputation and positive track record, it is of little surprise that investors were feeling bullish on GoDaddy yesterday.

Depicted: Admirals MetaTrader 5 – GoDaddy Daily Chart. Date Range: 26 April 2021 – 27 December 2021. Date Captured: 28 December 2021. Past performance is not a reliable indicator of future results.

 

Depicted: Admirals MetaTrader 5 – GoDaddy Weekly Chart. Date Range: 4 June 2015 – 27 December 2021. Date Captured: 28 December 2021. Past performance is not a reliable indicator of future results.

 

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Roberto Rivero
Roberto Rivero Financial Writer, Admirals, London

Roberto spent 11 years designing trading and decision-making systems for traders and fund managers and a further 13 years at S&P, working with professional investors. He has a BSc in Economics and an MBA and has been an active investor since the mid-1990s