Autodesk must explain financial misreporting: activist Starboard Value

Jeff Smith, managing member of Starboard, wrote that it was “madness” that the company had not explained which executives were behind the financial misrepresentation that forced Autodesk to delay its annual report more than a month after the investigation was completed.

An Autodesk representative did not immediately respond to a request for comment.

An internal investigation into Autodesk found that executives had reversed a widely publicized change in fee policies toward their customers after realizing that Autodesk would not meet its 2023 free cash flow target. The internal investigation led to the replacement of the company’s chief financial officer and sparked inquiries from financial regulators and the Department of Justice.

Starboard believes the company did not do enough to address shareholder concerns about the investigation, news of which sent Autodesk’s stock price down 20 percent, and efforts to deceive investors involved more executives than just Autodesk’s CFO.

The activist, who owns more than $500 million in Autodesk, sent the letter after a Delaware judge blocked his attempt to postpone the software company’s annual meeting and start a proxy fight.

“We find it difficult to imagine that more members of management and possibly the board of directors were not aware of these issues,” Smith wrote in the letter, noting that either Autodesk executives must have intentionally kept the cancellation of the invoice secret from the board or Autodesk’s board of directors was aware of the changed plans.

“If the board cannot trust a manager, that person should no longer be employed by the company,” an apparent reference to former CFO Debbie Clifford, who was promoted to a new role as chief strategy officer after the investigation’s findings were announced.

“On the other hand, if management was transparent with the board and at least some board members were aware of it at the time of this misleading disclosure,” Starboard wrote, then those board members “should immediately resign.”

Starboard also believes that Autodesk spends too much on sales and marketing compared to its competitors, and that real improvements in operating margin would boost investor confidence and reduce the company’s discount to its competitors. The activist wrote that it has received “overwhelmingly positive feedback” from other investors frustrated with Autodesk’s alleged “poor corporate governance.”

“We urge the board to be transparent with shareholders about the wrongdoings committed, including disclosing all those responsible, and to ensure that changes are made to restore shareholder confidence,” Smith wrote.

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