What happened
Shares of ACI Worldwide (ACIW 1.62%) jumped today, up by 10% as of 1:20 p.m. EST, after activist investor Starboard Value increased its stake in the company and sent management a letter advocating for a sale. Starboard now owns 9% of ACI Worldwide.
So what
Starboard has been slowly accumulating shares in the fintech company, which enables electronic payments, throughout the year. ACI shares have lagged the broader market in 2020, and Starboard suggests that the company is undervalued and that a sale would unlock shareholder value. The investor notes that ACI declined to pursue a sale a year ago, believing that it could fare better as a stand-alone public company. The stock had declined by as much as 45% since then.
ACI has missed its long-term guidance on numerous occasions throughout the years, and Starboard was expecting the company to provide a stronger outlook at its recent Analyst Day after declining to pursue a sale.
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"Instead, we were presented with a guidance range that is so conservative that it seems almost impossible for management to miss, and a gradual three-year timeline that implies it will take ACI almost another two years from today just to get back to its 2019 revenue base and start producing new organic growth," Starboard managing member Jeff Smith wrote.
Now what
Starboard points out that the payments industry has consolidated in recent years, arguing that the environment is conducive to a potential sale.
"Ultimately, it is incumbent upon the Board to assess the risk-adjusted value that could be realized in the future by executing management's plan, and weigh this against the value that could be realized in the near-term through a sale of the Company," Smith concludes. "In light of this, we expect the Board to retain advisors and conduct a full and fair sale process."
