It seems the company’s ownership structure is about to undergo a small but impactful change.
It seems that Starbucks (SBUX 6.85%) will soon have an activist investor within its ranks advocating for change. Several media reports have said that a well-known activist investment firm has amassed a stake in the popular coffee shop chain operator. On Friday, investors greeted this news by trading up the company’s stock by nearly 7%. That performance was miles better than that of the S&P 500 index, which fell by 0.7% on the day.
Interesting shift in institutional ownership
The Wall Street Journal broke the story on Friday. Citing unidentified “people familiar with the matter,” the financial newspaper said that Elliott Investment Management has built up a “sizable” stake in Starbucks. It added that it could not determine how large a position this might be, or if Elliott was also aiming to secure seats on the board of directors.
In recent weeks Elliott, which has a long history dotted with some successes as an activist investor, has been agitating for Starbucks management to devise ways of boosting its stock price, the Journal wrote. Although the company’s stores are durably popular, we can’t say the same for its shares lately, which have declined more than 17% year to date and by 21% over the past 12 months.
After spending many years aggressively building out its network of cafes, Starbucks doesn’t have as much scope to grow purely by expansion. Meanwhile, economic struggles in China — a crucial international market for the company — have dinged its business.
Relief rally?
Neither Elliott nor Starbucks management has yet commented on the Journal‘s reporting.
Assuming the article is accurate, it’s not surprising that Starbucks has attracted a well-resourced activist investor. It is a top company in its industry that has stumbled lately and been punished by Mr. Market for doing so. Some of those unhappy investors are surely coming back to the stock now that there’s (apparently) a determined shareholder pushing hard for some changes in strategy.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Starbucks. The Motley Fool has a disclosure policy.