Hedge Fund Giant Accuses Riverbed Of Misleading Investors

Riverbed Technology

Paul Singer’s Elliott Management has turned up the heat with Riverbed Technology, Inc. (NASDAQ:RVBD), accusing the technology firm of misleading its investors.

Riverbed management and board have “crossed a line to actively misleading shareholders”

“By publicly denying the buyer interest that has been expressed to the Company and by comparing the value of Elliott’s bid to a false reality, Riverbed’s management and board have crossed a line from failing shareholders to actively misleading them as well,” Jesse Cohn, portfolio manager at Elliott, said in a regulatory filing.

Numerous parties are said to have contacted the Company to express interest in buying Riverbed, based on reports of direct representations between Riverbed and Elliott.

Elliott contends that strong buyer interest exists and has been directly expressed to Riverbed Technology, Inc. (NASDAQ:RVBD) and its advisors, the report said, yet thus far been ignored by Riverbed’s board of directors. Furthermore, despite making a $21-per-share cash bid, as reported in ValueWalk, and “indicating that we could potentially increase our own offer if given access to diligence, Riverbed has denied us the opportunity to conduct any diligence.”

“Highly misleading statements in the face of a very real opportunity to maximize value for shareholders through a transaction”

“It is bad enough that this Board has overseen a history of poor execution, an overpriced acquisition and severe stock price underperformance relative to all relevant benchmarks and peer averages over any period of time. Now, this same board is allowing management to make highly misleading statements in the face of a very real opportunity to maximize value for shareholders through a transaction,” Cohn said.

In the 13D filing, Elliott posted a presentation from the investment bank Moelis & Company, which was done to validate Elliott’s $21-per-share bid for Riverbed, which is being apparently ignored.  “Riverbed purports to take seriously any offer that is ‘serious’ and ‘credible.’ As the presentation put forward by Moelis today shows, our bid of $21-per-share represents compelling value for Riverbed shareholders that any responsible Board should explore,” Cohn said. “The clear and correct path forward is for the Board to stop misleading shareholders and instead allow all interested buyers, including Elliott, to conduct diligence with an eye toward exploring a value-maximizing transaction.”

Riverbed CFO denies existence of “credible” offers in $25 range

At an investor conference last week, Riverbed Technology, Inc. (NASDAQ:RVBD) CFO Ernie Maddock appeared to ignore the existence of Elliott’s $21 per share offer.  When asked if Riverbed received unsolicited offers in the $25 range, Maddock replied, “I think it’s reasonable to assume that, had those existed, there would have been some response.” After this Riverbed CEO Jerry Kennelly told Bloomberg that a “serious” party had not made a “credible” bid, a direct swipe at Elliott.

We’re taking our time, says Riverbed

When explaining analysis behind the assertion that Elliott’s $21-per-share bid undervalued the Company, Maddock stated in the report, “We did the traditional math, and looked at growth rates … And the conclusion was that as things exist today, there is likely more opportunity in allowing the Company to continue to execute its plan.”

“We’re choosing to take our time, energy, and attention and focus it on the execution of our business plan, which ultimately is the way of creating long-term shareholder value and that’s what we’re paid to do,” Maddock said.

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About the Author

Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com

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