Shares of unmanned aerial vehicle specialist-cum-battery fast-charger equipment maker AeroVironment (NASDAQ:AVAV) surged in early Wednesday trading, helped by kind words from a new investor that's just taken a substantial stake in the company.
This morning, activist investor Engaged Capital announced that it has taken a 5.1% equity stake in AeroVironment. Simultaneous with announcing its interest in the stock rising, Engaged explained why it thinks the stock will rise.
Specifically, Engaged argued that AeroVironment is "undervalued" because of a combination of "poor corporate governance ... financial disclosure ... capital structure, and ... capital allocation." The company hopes, however, "to work constructively with the Company's board of directors and management" to improve governance, enhance disclosure, and optimize capital allocation, all with the aim of achieving "fair valuation for AeroVironment."
Praising the company's products and technology as "impressive," Engage says it will be urging AeroVironment management "to implement strategic initiatives to enhance the Company's equity valuation and maximize value for all shareholders." Whether such initiatives will be limited to simply improving the quality of the business, or perhaps to selling it or spinning off its disparate parts to focus in on one line of business -- batteries, or robotic airplanes -- remains to be seen.
Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends and owns shares of AeroVironment. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
More from The Motley Fool
A Fresh Twist on Electric Vehicle Charging
A new charger from Aerovironment could make it easier to charge at work and in multi-unit residences.
Solar Drones Take a Step Towards Commercial Flight
If drones can fly on solar power alone they may never have to return to the ground.
Why Shares of AeroVironment, Inc. Popped 23% in December
A big earnings report sent this drone stock higher to end 2017.