Starboard Value LP, which owns a more than $500M stake in Autodesk (NASDAQ:ADSK), called out the company’s board of directors in a letter to shareholders on Monday.
The investor group said the board “manipulated the corporate machinery and perpetuated an entrenchment scheme by failing to disclose material malfeasance regarding the Company’s accounting and disclosure practices prior to the deadline to nominate director candidates for election at the 2024 Annual Meeting of Shareholders.”
Autodesk ticked up 5% during early market action on Monday following the revelation.
“We have great respect for Autodesk, a pioneer and leader in design software over the last forty years,” Starboard said in the letter.
“We also believe Autodesk has an opportunity to create significant shareholder value by meaningfully improving its combination of growth and profitability through substantial margin improvement, as well as adopting more shareholder-friendly capital allocation policies and improving governance and oversight,” the group added.
Starboard points to an Audit Committee Investigation that discovered issues related to accounting and disclosure practices, as well as executive compensation procedures. It also found the board allegedly “chose to withhold material information from shareholders ahead of the nomination deadline in order to preserve the status quo and insulate the incumbent directors from a potential challenge by shareholders.”
Starboard has called for a refresh of the company’s board of directors and has filed a lawsuit in the Delaware Court of Chancery to delay Autodesk’s 2024 Annual Meeting.
Starboard points to a finding in the investigation that Autodesk had not switched to an annual billing process for its large enterprise customers and had continued to use multi-year upfront billings, despite telling shareholders otherwise. This was allegedly done to artificially inflate reported free cash flow.
