Activist investor Elliott Investment Management has taken a large stake in e2open, the supply chain software provider that last week ousted its CEO and saw its stock plunge when its earnings were released.
In a 13D filing with the Securities and Exchange Commission submitted Friday, Elliott Management said it has either outright ownership or indirect ownership through cash settled swaps that together amount to approximately 13.8% of the outstanding class A shares of the company, which total about 303.2 million.
Shares of e2open (NYSE: ETWO) actually owned outright, net of the swaps position, total about 9% of the outstanding shares.
In its filing, Elliott Management said it “believes the securities of [e2open] are undervalued and represent an attractive investment opportunity.” It said Elliott “will seek to engage in a dialogue” with the e2open directors to “maximize shareholder value.”
Possibilities that might come out of those discussions are “potential changes in [e2open’s] operations, management, organizational documents, composition of the Board, capital or corporate structure, sale transactions, dividend policy, strategy and plans.” The reference to dividends is for a company that does not pay them.
Based on the 13D filing, it appears that Elliott Management swooped in quickly after the disastrous one-two punch last week: weak earnings and the exit of CEO Michael Farlekas after the close of trading Tuesday, followed by an earnings call with analysts.
The late Tuesday events sent the shares of e2open down somewhat less than 20% before the market opening Wednesday. But by the time trading got into full swing Wednesday, the rout was on, with e2open stock dropping from a Tuesday close near $4.38 per share to a bottom Wednesday near $2.20.
That is when Elliott Management made its move. In the 13D, it says it bought about 8.3 million shares that day at prices ranging from $2.20 to $2.40. It made an additional purchase Thursday at $2.52.
Ironically, Elliott just sold 1.75 million shares of e2open stock on Sept. 15 at an average price of $4.90 per share.
The news of the Elliott Management stake Monday sent e2open’s stock price back up. At approximately 2:15 p.m. Monday, e2open’s stock price was $3.02, up 57 cents for a gain of about 23.4%. That was just under its high for the day. Volume at 2:15 p.m. was more than double the average daily volume, according to Barchart. Its 52-week high was $7.20 on Feb. 2.
E2open responded with a short statement late Tuesday.
E2open carries a B rating on its debt from S&P Global Ratings, which is well down in the non-investment grade scale. Paying a dividend could trigger a downgrade, given leverage levels at e2open that in its spring 2022 review from S&P were in the 7X to 8X EBITDA level, which is high by almost any standard.
E2open declined comment on the Elliott Management filing.
Elliott Management’s most recent play in the logistics space was its sale of Ascent Logistics to private equity firm H.I.G. Capital. Ascent had been spun off by Roadrunner in 2020.
At a stake of more than 13%, its holdings in e2open would be one of Elliot Management’s largest in terms of percentage.
In its most recent 13F quarterly filing with the SEC, Elliott Management reported a 16% stake in Triple Flag Precious Metals (NYSE: TFPM) and 11% in Marathon Petroleum (NYSE: MPC), a major independent refinery.
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