Starboard Value hedge fund challenges comScore
Starboard Value, an activist hedge fund known for taking on companies like Yahoo and Macy’s, has unveiled its next target: comScore, the big media measurement company.
Starboard sued comScore this week in a Delaware court, seeking to force the company to schedule an annual meeting for the first time in two years.
The hedge fund said it has a 4.9 percent stake, making it one of comScore’s biggest shareholders, according to data from Standard & Poor’s Global Market Intelligence.
A comScore representative said it was assessing the suit, but declined to comment further.
In filing the lawsuit, Starboard is laying the path to potentially nominating its own slate of directors for the company.
It is the latest instance of an activist shareholder seeking to flex its muscle and change a company’s strategy. Such firms have often found tremendous success in recent years, as investors like Daniel Loeb of Third Point, Paul Singer of Elliott Management and Nelson Peltz of Trian have taken on ever bigger targets like Nestlé, Samsung and Procter & Gamble.
Starboard, led by Jeffrey Smith, has gained prominence in recent years for notable activist achievements. It ousted the board at the parent company of Olive Garden and helped prod Yahoo into finally selling off its embattled Internet operations.
Now it is taking on comScore, one of the best-known measurers of audiences, particularly online ones. It competes with companies like Nielsen.
ComScore went public in 2007. Two years ago, it agreed to buy another measurement company, Rentrak.
But for years, it has grappled with financial troubles. The company said last year that it was conducting an investigation of its financial statements.
During the inquiry co-founder Magid Abraham resigned as executive chairman but stayed on the board until December. Several other executives subsequently resigned.
The company was delisted from the Nasdaq stock market this year, after it had been given an extension to file restated financial reports, leaving it to trade over the counter. It expects to file its newly audited statements this summer.
Shares of the company have fallen more than 50 percent over the past two years.
The company has not held an annual meeting since July 21, 2015. But it has appointed several directors since then without calling an election, meaning that eight of the 12 board members were not approved by investors.
“The stockholder franchise is the ideological underpinning upon which the legitimacy of directorial power rests,” Starboard wrote in its lawsuit.
Also raising Starboard’s ire is a plan that comScore enacted this year — described as a move meant to protect certain tax assets — that effectively limits investors to holding less than 5 percent of the company’s stock.
In its lawsuit, Starboard argues that comScore was essentially flouting its own corporate rules. A representative for Starboard declined to comment beyond the court filing.