Shares of E2open (ETWO 5.65%) were up 22.4% this week as of Thursday's close, according to data provided by S&P Global Market Intelligence, following news that an activist investing firm has increased its stake in the company and is reportedly considering a bid to take it private.
To be sure, virtually all of E2open's rally occurred on Monday after a Securities and Exchange Commission (SEC) filing revealed billionaire activist investor Paul Singer's firm, Elliott Investment Management, now holds 27.25 million shares of E2open at a cost of just over $69.6 million, or $2.55 per share. The firm also entered into derivative agreements in the form of cash-settled swaps on another 14,526,506 shares, bringing its exposure to around 13.8% of the supply chain software company. The move more than doubled the 6.8% position Elliott Investment held in E2open as of the midpoint of 2023.
Why Elliot Investment Management might take E2open private
The timing is no coincidence. E2open stock plummeted more than 40% last week as investors lamented the company's weak quarterly results, disappointing full-year outlook, and resignation of its CEO. At the time, CFO Marje Armstrong acknowledged E2open's "growth rate remained below [its] potential," adding that growth reacceleration initiatives will likely take several quarters to yield results.
Perhaps more exciting than Elliot Investment building its stake was a follow-up report from Bloomberg indicating Mr. Singer is also weighing an acquisition proposal to bring E2open private. With shares still down nearly 50% year to date, even after this week's rebound, such a move would undoubtedly ease public pressure on the company as it executes its turnaround.
What's next for E2open investors
There are no guarantees, of course, that Elliott Investment will follow through with a go-private acquisition proposal. But if they do, it would almost certainly come at a significant premium to the current trading price. That said, given the company's current growth headwinds that led to last week's precipitous decline, I wouldn't hold my breath hoping for an acquisition premium that rivals E2open stock's highs from earlier this year.
The stock might be worthy of opening a small speculative position in your portfolio if you like E2open's business as Singer does. Otherwise, there's no shortage of other compelling stocks in which you can put your money to work.
