Dropbox soars on report that activist hedge fund Elliott Management has a 10% stake in the company

dropbox ceo Drew Houston and co-founder Arash Ferdowsi
Dropbox CEO Drew Houston and co-founder Arash Ferdowsi.

Dropbox stock soared on Wednesday after a report out of the Wall Street Journal revealed the activist hedge fund Elliott Management holds a 10% stake in the company, worth well over $800 million.

Speculation about a potential activist investor stake in Dropbox has been swirling since mid-May when a 13-F filing from UBS showed that the bank had picked up 7.7 million shares of Dropbox in the second quarter. UBS is often associated with activist investors taking swap positions through banks.

Now, unnamed sources speaking to the Wall Street journal confirmed Elliott Management has entered the fray.

The hedge fund boasted more than $41 billion in assets under management (AUM) as of January 2021 and is known as one of the busiest activist investors in the markets.

The firm has been involved in Twitter, Comcast, and dozens of other stocks as an activist shareholder, pushing for changes to help increase return on equity for investors.

Dropbox was founded in 2007 by Drew Houston and Arash Ferdowsi and is focused on offering cloud-computing storage solutions to its over 700 million registered users.

The company reported revenue of $1.9 billion last year, an increase of 15% year-over-year, and boasts a market cap of over $11 billion.

Dropbox went public in March 2018 at $21 a share, and its stock quickly shot up to nearly $40 per share by the summer. However, since then, Dropbox has struggled to break out of the $20 to $25 range amid increasing competition in the cloud storage space.

In January, the company was also forced to cut 11% of its workforce, with CEO Drew Houston saying, “the steps we’re taking today are painful, but necessary.” The move came just months after the company said all of its workforce would be allowed to work remotely on a permanent basis.

Despite the poor performance over the past two years, Dropbox shares have jumped roughly 23% in 2021. This, despite first-quarter earnings results, which showed a continued decline in the company’s revenue growth (first-quarter revenue rose just 12%).

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An activist investor with a 0.02% stake in Exxon ousted 2 of the oil giant’s board members in a historic win

exxon mobil fall 2x1
  • Activist investor Engine No. 1 was victorious in winning at least two board seats on Exxon Mobil’s board of directors.
  • The win was historic given that the first time activist investor built a tiny 0.02% stake in the company.
  • The proxy fight between the activist investor and Exxon Mobil signals the increased investor attention towards green energy initiatives.
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Activist investor Engine No. 1 scored a historic win on Wednesday after it won two board seats on Exxon Mobil’s board of directors.

A bitter proxy fight between the major oil company and the small activist investor circled around green energy initiatives, executive pay, and the diversification of Exxon’s fossil fuel business.

The win took many by surprise given that Engine No. 1 is a first time activist investor with just a 0.02% stake in Exxon. Typical activist investor campaigns have been led by well-known Wall Street figures who buy a position upwards 10% in the targeted company.

The win by Engine No. 1 highlighted the growing appetite among investors for corporations to tackle climate change and green energy initiatives head-on. Many top institutional investors view addressing the climate as essential for a successful long-term business, including BlackRock founder and CEO Larry Fink.

Exxon was staunchly against Engine No. 1’s two board nominees, Gregory Goff and Kaisa Hietala. Exxon CEO Darren Woods refused to meet with the nominees and told shareholders that voting for them would “derail our progress and jeopardize your dividend,” according to Bloomberg.

Just two-days before today’s annual shareholder meeting, the company pledged that it would add two new directors to its board to counter-balance the potential addition of Goff and Hietala.

Other fossil-fuel companies have seen a revolt among shareholders in vote proposals. Chevron, DuPont de Nemours, and ConocoPhillips have all seen their shareholders issue rebukes to management by voting in favor of various proposals centered on climate change, Bloomberg highlighted.

Two board seats on Exxon remain undecided, and one or both of them could still potentially be awarded to Engine No. 1. Whether Woods will take the advice of the new board members and pivot towards a greener future remains to be seen.

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