Activist Starboard Value recently took 9% stake in website platform Wix. Here’s what may be next.
Wix is a market leader in web development tools that operates in an attractive space with long-term growth tailwinds. They have a sticky business that is not typically affected in bad economies: People do not shut down their websites in down markets.
Wix initially targeted 20% FCF margins but that assumed a 20% growth rate. They have since committed to 20% FCF margins by 2025 that is not dependent on 20% growth by implementing a $150 million cost savings program. If the company is committing to 20%, it is very likely that more than that can be done and we have seen companies significantly exceed their estimates before with Starboard involved.
While Starboard's primary objective here is operational, when an activist engages with a company, it often puts that company in pseudo-play getting the attention of strategic investors and private equity. While Starboard is not advocating for any strategic transaction, they are economic animals with fiduciary duties. If an offer came in at the right price, they would weigh it against shareholder value as a standalone entity and do what they believe to be best for shareholders.
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