Shares of GoDaddy Inc. (GDDY) experienced a 3.5% surge in premarket trading on Tuesday following a letter sent by activist investor Starboard Value LP, urging the company to explore “alternative value creation opportunities.” These opportunities include considering a potential sale of the renowned web-hosting company.
With a hefty 7.8% stake in GoDaddy, Starboard believes that the company is significantly undervalued. In fact, the stock is currently trading at roughly a 40% discount compared to its counterparts in the broader technology sector. In light of this, Starboard emphasizes the need for further cost-cutting measures to enhance shareholder value.
Moreover, Starboard finds it troubling that GoDaddy has not welcomed one of its largest shareholders to be represented on its board. This lack of representation raises concerns, especially considering the company’s history of failing to meet its commitments and generating subpar shareholder returns.
While GoDaddy’s stock has suffered a 6.0% decline over the past year, it’s worth noting that the Technology Select Sector SPDR ETF (XLK) has witnessed an impressive 24.6% rally during the same period. Additionally, the S&P 500 (SPX) has surged by 9.2%.
It will be interesting to see how GoDaddy responds to Starboard’s letter, as it grapples with the pressure to reassess its prospects and potentially explore a sale. Investors will undoubtedly keep a close eye on any developments as they unfold in the coming weeks and months.
