Shares Spike on Elliott Campaign
■ The IT
company's shares were up 10% early Monday after billionaire activist
Paul Singer launched a campaign urging the company to set up a capital
IT services company Cognizant Technology Solutions ( (CTSH)
) shares spiked up by 10% early Monday after billionaire activist Paul
Singer and his activist investment fund Elliott Management launched an
activist campaign urging the company to make a variety of changes,
such as establishing a capital distribution program.
"Despite growing into a scale market leader with stable and
significant cash flows, Cognizant has remained unwilling to establish
a capital return program," said Elliott portfolio manager Jesse Cohn
in a 16-page-letter.
The activist fund pointed out that Cognizant has $4 billion in cash as
well as $1.1 billion in onshore cash following a recent repatriation,
and "virtually no debt." The activist fund said that Cognizant is
trading at its lowest valuation since the financial crisis. The fund
also urged Cognizant to make changes to its delivery process, its
sales and marketing program and make cuts to its human resources
department and finance unit.
If the company doesn't respond soon, the New York-based Elliott could
launch a proxy contest to elect dissident directors and drive the
change the fund is seeking. Elliott has launched more than 96
campaigns at 92 companies since 1994, including 13 proxy fights,
according to Factset.
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