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What has Happened?

On the 27th of December 2021, the shareholders at GoDaddy received a welcome late Christmas present as news emerged of heavyweight hedge fund, Starboard Value LP purchasing a substantial share in their organisation.

Shareholders were overjoyed at the post-Christmas ‘miracle’. They have since met with management and the GoDaddy board to implement strategies to capitalise on the new cash inflow. With the idea to further increase value for shareholders.

What Does This Mean?

It is believed that Starboard paid $800 million and now controls an estimated 6.5% stake in the billion-dollar GoDaddy. Consequently, share prices increased nearly ten percent. The scenario is a prime example of the minority shareholder Starboard pushing for changes to improve the performance of the share price.

Before this announcement, GoDaddy had been in poor form on the New York Stock Exchange. Since January 2021, the market cap has barely progressed one percentage point, and its projected market cap growth was only crawling. Starboard Value LP is considered a good match for GoDaddy as, historically, they have successfully purchased similar domain registrars.

GoDaddy failed to anticipate the impact of challenges on the company’s performance. It has been unable to sustain a competitive advantage over its competitors. This has damaged their strategically desired service diversification. Secondly, decision-makers have not made the transformations required to compete in today’s modern commercial world.   

What Impact Could This Have on the Legal Profession?

This is further evidence of a turning tide in the corporate sector over recent decades. Traditionally, approaches from global hedge funds were staunchly opposed by controlling shareholders with a safe majority. Minority shareholders were perceived negatively as ‘corporate raiders’ seemingly opposing the majority view. These minority groups were portrayed as perceptively hunting down apparently ‘struggling’ commercial entities like prey as though they were partaking in a blood sport.

However, this transaction indicates the changing sentiment amongst incumbent corporate decision-makers because shareholders are now apparently welcoming these ‘activist’ investors with open arms, seemingly because they have positively affected many organisations. They tend to purchase substantial share proportions in Stock Exchange organisations and intend to turn around the fortunes of perceptively sinking corporations.

These minority shareholders can face some critical hurdles if purchasing more than five percent of the equity in such transactions. Firstly, such investors must remember their filing obligations as they will be under a duty to file Form 13D with the Securities and Exchange Commission. Furthermore, the value of the transaction must be examined to see if it is significantly large. Over $800million in this scenario will be classified as a significantly large enough stake in the organisation. Lawyers should be advising their corporate clients of any regulatory hurdles they need to jump over when positioning the company in this kind of transaction. For example, in the US, the company may need to file Schedule 13D with the Securities and Exchange Commission.

Moreover, corporate clients will need to consider the inter-trust considerations and may be required to disclose a filing to the Securities and Exchange Commission if the transaction is over $92million. Organisations will need to follow their communication strategy, meet with minority investors privately and discuss their corporate priorities. Kai Liekefett from leading law firm Sidley Austin LLP advised minority shareholders to decide either to ‘put up’ or ‘shut-up’ on whether they want a ‘proxy contest’ to potentially remove part or the whole of the board target company. If a minority shareholder group contemplates such a contest, they must adhere closely to the nomination deadline. In the case of Go Daddy, this is dated February or March 2022.   

Assessing Firms

#SidleyAustin #Vinson&Elkins #Kirkland&Ellis #Latham&Watkins, #Wharton&GarrisonLLP #WachtellLiptonRosen&Katz #ClearlySwaine&MooreLLP #FreshfieldsBruckhausDeringerLLP #Goodwin #MorganLewis&BockiusLLP #Ropes&GrayLLP #WeilGotshal&MangesLLP #Olshan FromeWoloskyLLP #SchulteRoth&ZabelLLP #AkinGumpStraussHauer&FeldLLP

This Article was Written Using the Following Sources

[SOURCE 1] Lombardo, Cara – Starboard Takes 6.5% Stake Worth Around $800 Million in GoDaddy – Wall Street Journal – the 27th of December 2021 - Starboard Takes 6.5% Stake Worth Around $800 Million in GoDaddy - WSJ

[SOURCE 2] Choudhury, Uttara – Starboard takes a sizeable stake worth around $800M in GoDaddy – the 27th of December 2021 - Starboard Value LP takes a sizable stake worth around $800M in GoDaddy Inc (proactiveinvestors.co.uk)

[SOURCE 3] Li, Yun – Starboard Value builds 6.5% stake in GoDaddy, sending shares up 8% - the 27th of December 2021 - Starboard Value builds 6.5% stake in GoDaddy, sending shares up 8% (cnbc.com)

[SOURCE 4] Jang-Sup, Shin – How Hedge Fund Activists Prey on Companies - How Hedge Fund Activists Prey on Companies - Economics

[SOURCE 5] https://www.sidley.com/-/media/uploads/googles-incognito-mode-and-activist-investor-lawssegment.mp3

[SOURCE 6] GoDaddy (GDDY) Market capitalization - GoDaddy (GDDY) - Market capitalization (companiesmarketcap.com)

[SOURCE 7] Starboard acquires a 6.5% stake in GoDaddy worth about $800 million - Starboard acquires a 6.5% stake in GoDaddy worth about $ 800 million (ehtrend.com.br)

[SOURCE 8] Sriram, Akash - Starboard acquires stake worth $800mln in GoDaddy – the 27th of December 2021 - Starboard acquires stake worth $800 mln in GoDaddy | Financial Post

[SOURCE 9] Nickie, Louise – Starboard acquires $800 million stake in the world’s largest domain registrar GoDaddy – the 27th of December 2021 - Starboard acquires $800 million stake in the world’s largest domain registrar GoDaddy | Tech News | Startups News (techstartups.com)

[SOURCE 10] Simonetti, Isabella – Activist Hedge Fund Starboard Takes 6.5% Stake in GoDaddy, Worth $800 Million – the 27th of December 2021 - Activist Hedge Fund Starboard Takes 6.5% Stake in GoDaddy | Observer

[SOURCE 11] Gupta, Payal – Starboard Value Buys 6.5% Stake in GoDaddy for $800M- Report – the 29th of December 2021 - Starboard Value Buys 6.5% Stake in GoDaddy for $800M – Report | Nasdaq

[SOURCE 12] Blye, Andy – Activist investor Starboard takes 6.5% stake in GoDaddy – the 27th of December 2021 - Activist investor Starboard Value takes 6.5% stake in Tempe-based GoDaddy (GDDY) - Phoenix Business Journal (bizjournals.com)

[SOURCE 13] Tripathi, Dhirendra – GoDaddy Jumps on Report Hedge Fund Starboard Owns 6.5% Stake – the 27th of December 2021 - GoDaddy Jumps on Report Hedge Fund Starboard Owns 6.5% Stake By Investing.com

Written by Jason Connolly