Engine Capital pushes EPAM for share buybacks or sale
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Figurines with computers and smartphones are seen in front of EPAM logo in this illustration taken, February 19, 2024. REUTERS/Dado Ruvic/Illustration
Aug 31 (Reuters) - Activist hedge fund Engine Capital said it wants software firm EPAM Systems to either buy its own shares or consider selling itself after its stock price tumbled more than 40% this year.
Engine, which owns a 1.5% stake in the Newtown, Pennsylvania-headquartered company, told the board on Monday the low share price has hurt all investors and the board has two choices: "aggressively" buy EPAM shares or start a process to see what a buyer would pay for the company.
Engine also wants to see new directors added to the board and is pushing for the creation of a capital allocation committee.
EPAM currently has a market value of $6.12 billion and its stock price climbed 3.5% as investors reacted to Engine's public pressure on the board and management.
While the company's stock price was dented by industry-wide fears that artificial intelligence will disrupt tech companies' businesses, EPAM is lagging its peers and the broader IT Services space, prompting Engine to conclude it is now priced as "a relative loser" by the market.
"The status quo is untenable," Arnaud Ajdler, Engine's managing member, wrote to the board in a letter made public on Monday.
Ajdler urged EPAM's board to use its existing $750 million cash pile, along with future free cash flows and debt, and wrote that the board could repurchase between roughly 60% and 80% of its shares by the end of 2028.
If the board does not pursue more buybacks or the program fails to boost performance, the company should launch a formal strategic review overseen by independent directors and a financial adviser, the letter said.
EPAM and Engine Capital did not immediately respond to requests for comment.
Engine successfully pushed for the sale of uniform and facility services company UniFirst to Cintas this year.
(Reporting by Svea Herbst-Bayliss in New York; Additional reporting by Prathik Jayaprakash in Bengaluru; Editing by Maju Samuel and Chris Reese)
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