Engine Capital, an activist investor, has purchased a stake of 3.5% in Upwork Inc.
Engine Capital is responding to Upwork’s poor performance in comparison to Fiverr International Ltd. in 2024.
In a recent letter, the hedge fund emphasized the importance of strategic reforms and cost-reductions as well as an expansion to the enterprise sector.
The Upwork team lacks clarity of strategy and focus
Engine Capital’s Letter highlights the issues it believes Upwork has at its foundation, which is contributing to a drop of 40% in Upwork’s share price since January.
The activist investor expressed concern about Upwork’s strategic lack of clarity and focus.
According to Arnaud Ajdler of Engine Capital, the frequent turnover, three times in four-years, in Upwork’s Chief Financial Officer role, further underscores perceived issues with governance.
Engine Capital wants a shakeup of the board, saying that no current director has substantial experience with staffing and marketplace operations.
Stocks are currently below $10 after plummeting from an all-time high of $59
Wall Street analysts remain optimistic about the potential for a recovery.
It is expected that the Upwork stock will reach $14 within the next 12 months. This represents a possible upside of over 50%.
Does Upwork have a low stock price?
Engine Capital claims that Upwork’s stock is undervalued. It trades at a valuation of 6.5 EBITDA.
The hedge fund claims that stock trading is at a discounted price compared with its intrinsic value, and other online markets and staffing companies.
The activist investor, although it did not demand a new CEO, urged the management to reduce costs and buy back shares in order to increase shareholder value.
The company is also blamed for its ongoing weakness due to the extended tenure of Upwork board members, which highlights a need for fresh perspectives.
The reform push comes after Upwork announced $193 million of revenue in the second quarter 2024, a growth rate of 14% over last year and meeting analyst expectations.
Hayden Brown, CEO of Hayden Brown Inc. expressed his confidence that the company will grow over the long term. He cited ongoing innovation and AI’s potential to change the workplace.
In addition, the company reported a profit of 17 cents a share. This was higher than expected. The goal is to reach 35% EBITDA adjusted margins in five years.
Upwork’s current situation illustrates how activist investors are increasingly influencing corporate strategy, especially as competitive pressures continue to affect stock performance.
Engine Capital’s continued push for change will have everyone watching to see how Upwork reacts.
As new information becomes available, this post Engine Capital, an activist investor at Upwork who wants a board shake-up amid declining stock results may change.
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