Activist Starboard sues Autodesk in bid to mount proxy fight

Starboard Value sued software maker Autodesk on Monday to delay the company's annual meeting and reopen the board nominating window and allow the activist to mount a proxy fight.

Activists can typically only begin a proxy fight, involving the nomination of a slate of directors to replace the existing board, if they submit their proposals within a specific window. Starboard confirmed in a letter on Monday that it has a stake in Autodesk valued at more than $500 million. Autodesk shares rose more than 7% on the disclosure.

Starboard said in its suit that Autodesk, in "an apparent effort to prevent a proxy challenge," deliberately waited until that window had closed before disclosing to shareholders that it would delay its annual report and launch an internal investigation into accounting irregularities and financial misreporting.

"Manipulating corporate governance and disclosure obligations to give stockholders only one choice of directors effectively gives them no choice at all," Starboard said in its complaint, which was filed in Delaware Chancery court.

Autodesk began probing irregularities around how it reported operating margin and free cash flow in early March. By March 8, Autodesk had informed the SEC of the probe, regulatory filings show.

The company waited until April 1 to tell shareholders about the investigation, filings show, which was more than a week after the nominating window had closed.

The probe found that Autodesk executives made significant business decisions around how it billed customers and spent money to improve its free cash flow and operating margin. The findings were announced on May 31, alongside the replacement of CFO Deborah Clifford.

"In a calculated scheme to ward off any potential challenges to their Board positions through a proxy contest, the incumbent directors failed to divulge these egregious issues regarding accounting misdirection and disclosure problems during the nomination window," Starboard said in its suit.

Starboard began speaking with Autodesk's board about those issues and the broader underperformance of the business shortly after the findings were publicized.

An Autodesk representative didn't immediately respond to a request for comment.

Autodesk said in an earlier statement that that it would refuse Starboard's requests to reopen the nominating window and delay the annual meeting.

"Starboard is seeking to leverage a now-completed internal investigation that resulted in no financial restatement as a pretext for re-opening the advance notice period," the company said in the statement.