Activist Starboard amasses Autodesk stake, weighs suit over delayed probe disclosure

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Activist Starboard Value has a $500 million stake in software maker Autodesk and is weighing legal action over the company’s delayed disclosure of an internal investigation into accounting malfeasance. Autodesk moved its CFO to a new role after an internal probe found that executives reversed a shift in billing structure to inflate the company’s free cash flow and operating margin numbers, two metrics which are used to determine executive pay and to measure the success of a company. Starboard is concerned that Autodesk delayed disclosing an internal probe until shortly after the nominating deadline for the company’s board, which would potentially limit a shareholder’s ability to nominate its own candidates in a contested fight. Jeffrey Smith, CEO and chief investment officer at Starboard Value LP. David Paul Morris | Bloomberg | Getty Images

Starboard Value, the activist fund run by Jeff Smith, has taken a sizable stake in graphics-design firm Autodesk and has spoken with the company’s board in recent weeks over a number of serious concerns involving its disclosures around an internal investigation that led to the ouster of its chief financial officer.

Starboard’s stake is valued at roughly $500 million, according to people familiar with the matter. The activist, which has a long track record of investing in the technology sector, is particularly concerned about the timing of Autodesk’s disclosure of an internal investigation which revealed that executives misled investors around the company’s free cash flow metrics and operating margins, said the people, who requested anonymity to discuss confidential information freely.

The results of that probe led to the ouster of Autodesk’s then-CFO, Deborah Clifford, who was moved to a different executive role within Autodesk. The probe found that executives manipulated reporting tied to company’s contract billing structure, as Autodesk shifted back to upfront payments from annualized payments, to improve those metrics.

Autodesk first disclosed in April that it had begun an internal investigation into disclosure issues around those metrics, almost a month after it had first begun the investigation and had informed the Securities and Exchange Commission that it was probing its financial reports. Autodesk shares slid 20% over the next few weeks. The company’s market cap now sits slightly below $50 billion.

The delayed disclosure came a little more than a week after the deadline to nominate directors closed. The tight window and timing of the disclosure has raised significant

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