Why Conduent Stock jumped today
Actions of Driving (NASDAQ: CNDT) were trading around 25% higher as of 1:30 p.m. EDT Monday, after activist investment firm Trillium Capital released a open letter to the board of directors. In the missive, Trillium described the ways in which she believes the business process services the company can maximize shareholder value.
Trillium owns more than 2.5 million shares of Conduent, and he is frustrated because, although the stock lost almost 70% of its value last year, its board of directors did not until present not been willing to respond to openings from Trillium. The company maintains that Conduent can unlock $ 3.9 billion in additional enterprise value if it follows Trillium’s suggestions, compared to its current enterprise value of $ 1.9 billion.
Trillium does not believe Conduent has the right management team and further argued that executives should collectively own more stock to align their interests with those of shareholders. The company is trying to cut costs by $ 100 million a year, but Trillium says there has been “no significant progress to date” on the goal.
As the COVID-19 pandemic has created significant macroeconomic uncertainties, Trillium believes Conduent is well positioned to help companies navigate the return to work. The activist investor offers specific suggestions for different business segments, such as the integration of artificial intelligence (AI) and machine learning in the transport services industry or the expansion of legal services in the commercial sector, among others.
Trillium also presented a sum of the parties analysis which suggests that Conduent could unlock value by divesting itself or by segregating each business segment as separate public companies.
“Finally, if the board is not prepared to separate the three lines of business, restructure the cost base, and address the management issues we described above to unleash the untapped shareholder value, we believe that the board has a fiduciary duty to put Conduent in its entirety for sale, ”writes Trillium. “We don’t necessarily think this will provide maximum shareholder value, but we believe it is a better alternative than the current course of action.”
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