GoDaddy Inc (NYSE:GDDY) shares are gaining ground in early Tuesday trading after activist investor Starboard Value sent a letter to the company stating "that a meaningful value creation opportunity exists" for the company.
Starboard, which owns approximately 7.8% of the outstanding common stock of GoDaddy, making it the third largest shareholder, expressed its disappointment with GoDaddy's operational, financial, and stock price performance over the last 18 months.
In early 2022, GoDaddy hosted an Investor Day and outlined financial targets for 2022 through 2024. However, Starboard said they spoke with management and felt there was upside to the targets, and while initial progress was made during 2023, GoDaddy "has fallen well off the pace on almost every metric it presented at the Investor Day."
"We believe key contributors to GoDaddy's poor share price performance include the deterioration of GoDaddy's growth + profitability profile and the perception among investors that the company is overly reliant on a reacceleration of growth to address this issue," the firm wrote. They added that the GDDY board should remain open-minded about alternative value creation opportunities, such as the room to drive higher incremental margins and implement cost reduction actions. Starboard also said it could include a potential sale of the company.
"Despite our disappointment with these results and the company's stagnant stock price, we believe there are significant opportunities within the control of the management team and Board to improve operating and financial performance," they added.
The activist investor feels GDDY is deeply undervalued. They also find it "deeply concerning" that GoDaddy has not welcomed one of its biggest shareholders into the boardroom.