Splunk (SPLK) Gains on Report Activist Investor Starboard Has a 5% Stake, Buyout 'More Likely Than Not' Says Analyst

(Updated - October 17, 2022 8:22 AM EDT)

Shares of Splunk (NASDAQ: SPLK) are up over 5% in pre-open Monday after the WSJ reported that activist investor Starboard Value holds a near-5% stake in the software company.

Starboard is reportedly pushing Splunk’s board to make changes. New actions would be aimed at boosting Splunk’s stock price, which is down almost 70% from 2020 high.

Starboard often targets underperforming software companies with room for operational and margin improvements. It wouldn’t be surprising that Smith also sees SPLK as a solid takeover target. Based on Friday's closing price, the company’s market capitalization was just under $11.5 billion.

Earlier in 2022, Cisco (NASDAQ: CSCO) made a bid of over $20 billion for Splunk, the WSJ reported in February. Shortly afterward, the private equity firm Hellman & Friedman said it had a 7.5% stake in Splunk, an involvement which resulted in one of the company’s partners earning a board seat at Splunk.

Last year, the private equity giant Silver Lake invested $1 billion in Splunk to fund the company’s transformation from a traditional software-licensing arrangement to a cloud-based subscription model.

More information about Starboard’s involvement will likely become available this week when Starboard founder and CEO Jeff Smith appears at a 13D Monitor Active-Passive Investor Summit.

Needham & Company analyst Mike Cikos is not surprised by reports about SPLK. He views the buyout as "more likely than not."

"Investors we have spoken with this year have increasingly viewed a buyout of Splunk as a binary event. We believe the volume of potential buyout candidates and activist investor agitation indicates a deal is likely. Separately, we view Mr. Smith's expected conference presentation and discussion on Splunk as rallying support for a takeout," the analyst wrote in a client note.

By Senad Karaahmetovic

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