Elliott acquired a 7.1% of the common stock and equivalents of Citrix Systems based on its 13D filing with the Securities and Exchange Commission (SEC). The firm believes that the company could achieve a stock price of $90 to more than $100 per share by the end of 2016.
The shares of Citrix Systems increased more than 6% to $70.24 per share at the time of this writing, around 12:09 in the afternoon in New York on Thursday.
Details of the investment
Based on the filing, Elliott beneficially owned 1,860,800 shares of common stock of Citrix Systems including 1,259,3000 shares of commons stock underlying options that are currently exercisable. The shares constitute approximately 1.2% of the outstanding common stock of the company.
Elliott International beneficially owned 3,612,300 shares of common stock of Citrix Systems including 2,638,800 shares of common stock underlying options that are currently exercisable. The shares represent approximately 2.3% of the outstanding common stock of the company.
As the investment manager of Elliott International, Elliott International Capital Advisors (EICA) may be deemed to own beneficially 3,612,300 shares or 2.3% of the common stock of Citrix Systems.
Eliott, Elliott International and EICA collectively, beneficially own 5,473,100 shares including 3,998,100 shares of common stock underlying options, currently exercisable. The shares represent 3.4% of the outstanding common stock of Citrix Systems.
The total amount of the shares of common stock owned by Elliott was approximately $31,892,406, and the call options were worth around $51,666,178.
The total purchase price of the shares of common stock owned by Elliott International was approximately $61,908,789 and the call options were worth around $100,299,839.
Elliott demands fundamental change at Citrix
Elliott sent a letter to the board of directors of Citrix Systems demanding for fundamental change and outlining a strategic and operating plan for the company.
Eliott emphasized that Citrix Systems has leading technology franchises in attractive markets, but it struggled operationally for years and missed a profound value creation opportunity.
The investment management firm emphasized that Citrix Systems underperformed every relevant benchmark and its closest peers over in every period of the past six years.
“We believe that Citrix can achieve a stock price of $90 – $100+ per share by the end of 2016. This outcome – which represents an increase in stockholder value of approximately 50% – is achievable because Citrix has leading technology franchises in attractive markets but has struggled operationally for years. As a result, today Citrix’s operations and product portfolio represent an opportunity for improvement of uniquely significant magnitude,” wrote Jesse Cohn, senior portfolio manager at Elliott.
Elliott based its proposed Citrix Operating Plan upon two driving principles: the need for fundamental change and effective oversight. According to the investment management firm, Citrix Systems needs to implement operational best practices and to evaluate its high-value non-core assets.
Elliott noted that the cost structure of Citrix Systems had become highly inefficient in terms of actual cost and ineffective at generating revenue growth because of years of layered complexity and expenses.
Elliott recommends sale or spin-off of Citrix assets
Elliott said the GoTo franchise and NetScaler assets of Citrix Systems could be separated from its core Workspace Services segment. The investment management firm said separating the segments could be meaningfully accretive to value. It would also allow the management to focus on improving the company’s core operational execution.
According to Elliott, Citrix Systems could sell or spin off GoTo Franchise and explore strategic alternatives for Netscaler.