Activist investment fund Starboard Value reported on Friday that it had reached a 9% stake in Israeli website development platform Wix (Nasdaq: WIX). Wix’s share price rose by more than 5% in response to the announcement.
Starboard said that it supported Wix’s streamlining plans, and that it believed that there was a significant opportunity to improve the company’s profit margins, according to a report by Reuters. Earlier this year, Wix announced a cost-cutting program intended to save the company $150 million a year and to widen its profit margins. Wix also announce a $500 million share buyback program.
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Starboard estimates that Wix’s stock is undervalued and that it represents an attractive investment opportunity. Starboard generally demands of companies in which it takes a substantial stake that they should carry out changes that it believes will unlock value. Starboard said in its announcement that it was likely to take steps in the future, among them talks with Wix’s management and board of directors, with other shareholders, and with third parties, on mergers and acquisitions, selling parts of the business, improving the company’s financial performance, the purchase or sale of shares, and other matters.
Reuters also reports that Starboard has discussed its ideas with Wix’s management, and is not seeking seats on the board of directors at present.
Wix has a market cap of $4.4 billion. During the Covid-19 pandemic it enjoyed a surge in demand as people sought to digitize their businesses. As the pandemic receded and economies reopened, demand declined, and Wix’s share price is down 54% so far this year, and down 79% from the peak it reached in February 2021, when it had a market cap of $20 billion. In the second quarter of 2022, Wix posted a $111.2 million net loss, which compares with a profit of $37.6 million in the corresponding quarter of 2021. At the end of 2021, Wix had 222 registered users around the world, most of them using the free version of the company’s platform. Only about 6 million were premium subscribers.
Starboard began to build a position in Wix in late July, when it bought shares at prices between $64 and $73 and also carried out options trades.
The firm has previously taken stakes in Israeli companies Mellanox, DSPG, and Zoran, and in dual-listed Perrigo. It recently took a position in US software company Liveperson, which is also traded in Tel Aviv, a move that tuned into a control battle and ended in a compromise without unlocking value in any significant way.
Published by Globes, Israel business news – en.globes.co.il – on September 18, 2022.
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