(News Bulletin 247) – According to the Wall Street Journal, the activist fund Starboard Value has taken a stake in the capital of the famous American coffee chain whose financial performance is not up to par. Starbucks shares are rising on Wall Street.
A new shareholder has reportedly joined Starbucks’ round table. It is the activist investment fund Starboard Value, which has reportedly taken a stake in the coffee king’s capital, according to information from the Wall Street Journal revealed this weekend.
The Wall Street Journal was unable to provide further details on the size of the hedge fund’s stake or Starboard Value’s intentions. But according to people familiar with the matter, the fund intends to weigh in on Starbucks’ strategy in order to boost the company’s stock price, which has lost 23% over the past year.
This is the classic modus operandi of an activist fund. These financial players take minority stakes in the capital of listed companies that are supposedly poorly managed in order to steer their strategy as they wish, hoping to make significant capital gains from it.
A Starbucks in decline
It must be said that Starbucks is clearly in a weak position. The group is facing a slowdown in its growth in its two key markets, China and the United States, even leading it to reduce its financial forecasts twice this year, recalls the WSJ.
“China is one of our biggest international challenges,” its CEO Laxman Narasimhan said in July, citing “renewed caution” among consumers and “intensified competition.”
On the New York Stock Exchange, the Starboard Value initiative reported this weekend by the Wall Street Journal is welcomed, with Starbucks shares rising 3.5% this Monday.
Eliott Management in the game
Starboard Value isn’t the only activist fund pushing for changes to Starbucks’ strategy. Elliott Management is also on board, taking a “significant” stake in July, estimated at nearly $2 billion by CNBC.
Eliott Management has since entered into “constructive” discussions with the US group’s management. The activist investor has offered to expand the board and improve governance as part of a deal that would allow Chief Executive Laxman Narasimhan to retain his position, CNBC reported in August.
Things could be getting better between the famous coffee chain and the formidable activist fund. Starbucks and Eliott Management are reportedly in talks to find common ground, CNBC reported on Monday, citing sources familiar with the matter.
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