What happened
Domain registration company GoDaddy (NYSE: GDDY) is rising sharply on Monday. As of 2 p.m. ET, shares were higher by 8% on the day after rising by as much as 10% earlier in the trading session.
The move wasn't fueled by earnings or any other news specifically related to the company's business. Rather, the jump is caused by a heavyweight investor taking a stake as well as investor speculation as to what this new investor might end up doing.
Image source: Getty Images.
So what
In a filing with the Securities and Exchange Commission (SEC), activist investor Starboard Value reported that it has purchased about 10.9 million shares of GoDaddy stock, which works out to a stake of about 6.5% in the company. In the filing, Starboard specifically said that shares are undervalued and that it might look to hold talks with the company or other shareholders.
Now what
When activist investors buy stakes in companies, they often plan to push for changes to improve performance. Activist investors often push for leadership changes or for a board seat for one of their representatives. They can also encourage a company to put itself up for sale or take specific steps to improve profitability in order to unlock shareholder value.
While we have no idea what Starboard might ultimately do, it's fair to assume that it plans to take an active role in this investment. With one of the best track records of any activist investor in history, it's no wonder why investors seem encouraged to have Starboard in their corner.
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Matthew Frankel, CFP® has no position in any of the stocks mentioned. The Motley Fool recommends GoDaddy. The Motley Fool has a disclosure policy.
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