Cerner Corporation (NASDAQ: CERN) is having an incredible day in the market today after bowing down to an activist investor, giving the hedge fund the changes it wanted to see. Of course, these changes are also in the interest of investors, who are excitedly sending the stock up. Today, we’ll talk about:
- The changes CERN made at the request of Starboard;
- what we’re seeing from the stock as a result; and
- what we’ll be watching for ahead.
CERN Stock Gains After Bowing To Activist
As mentioned above, Cerner Corporation is having a strong day in the market today after news broke that it decided to make the changes that an activist investor was pushing to see.
According to various reports, the company reached an agreement with the activist hedge fund, Starboard Value LP. As per the terms of the agreement, CERN will appoint four new Starboard-picked directors to its board. Moreover, it will be launching a $1.2 billion buyback program.
The four new directors appointed include:
- John Greisch, former president and CEO at Hill-Rom Holdings;
- Halsey Wise, former chairman and CEO of MedAssets;
- Melinda Mount, former president of AliphCom, also known as Jawbone; and
- George Riedel, former chairman and CEO of Cloudmark.
The company said that the appointments are part of a larger deal. In fact, CERN said that the larger deal includes:
…a board refreshment plan, operational improvement initiatives, commitments for operating margin targets, a new finance and strategy committee of the board and an expanded capital return program to drive the next phase of profitable growth and value creation.
Also, while CERN said that it will be launching a $1.2 billion buyback program, the company also said that the total authorized amount available for repurchase is $1.5 billion.
What We’re Seeing From The Stock
One of the first lessons that we learn when we start to invest is that the news causes moves. In the case of Cerner Corporation, the news proved to be positive.
At the end of the day, Starboard is known for forcing companies to make positive changes as an activist investor. With the company bowing down and creating the agreement, it shows that conditions are likely to improve for investors.
As is normally the case, our partners at Trade Ideas were the first to alert us to the gains. Currently (11:09), CERN is trading at $62.99 per share after a gain of $5.90 per share or 10.33% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on CERN. In particular, we’re interested in following the story surrounding the company’s continued work to improve value for investors under the agreement with Starboard. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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