The Morning Brief: Starboard Identifies its Newest Target

May 12, 2017   Stephen Taub

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The activist firm headed by Jeffrey Smith has taken a stake in Parexel International Corporation.

Starboard has identified its latest activist target. The activist hedge fund firm said in a regulatory filing it owns 5.7 percent of Parexel International Corporation, a life sciences consulting firm that conducts clinical trials on behalf of pharmaceutical clients.

In a regulatory filing, Starboard said that when it bought the stock the shares were "substantially undervalued" and that there is a "substantial opportunity to improve" operating margins given the company’s "large disparity" with its "best-in class peers." It also pointed to recent press reports that the company may be working with investment bankers about a possible sale. Starboard said if Parexel "runs a legitimate, robust process to explore strategic alternatives," there would be "significant strategic and financial buyer interest."

It also said it retained D. Jamie Macdonald as a consultant, noting he has significant experience as an industry executive, including as CEO of INC Research and senior vice president and head of global project management of Quintiles Transnational Holdings, "where he helped to significantly improve operating margins." Interestingly, the stock rose less than 1 percent on Thursday, to close at $75.24.

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UBS cut its price target on Snap from $24 to $19 after the social media company reported disappointing results for the first quarter since it went public earlier this year. "Over the short/medium term, we see the key three debates – user growth/engagement, ad monetization and valuation – as unresolved as a result of this first earnings report," it states in a note to clients. Shares of Snap plunged more than 21 percent, to close at $18.05.

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Steven Cohen’s family office, Point72 Asset Management, disclosed that as of May 10 it owned more than 12.9 million shares of Pandora Media, or 5.4 percent of the total outstanding of the streaming music company. The stock was flat on May 10 but closed down 4.5 percent on Thursday, May 11 to close at $9.50. The stock is down 20 percent since the end of the first quarter alone.

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Valeant Pharmaceuticals International’s stock continues to be on the move. Shares of the drug company rose another 8.8 percent on Thursday and are now up 42 percent over the past three days alone. They now stand at $13.80.

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The average hedge fund gained 0.66 percent in April, boosting the return to 3.04 percent for the year, according to data tracker eVestment. All major strategies made money in April except for commodities, which posted their third-straight losing month. Event Driven-Activist strategies were the best performers last month, gaining 2.03 percent in April and 3.70 percent for the year. Activist strategies are up 13.24 percent over the past 12 months.


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