Box: Private Equity firm Starboard Value takes more control

Box CEO Aaron Levie

Most users of cloud content management software provider Box love the product. Still, investors seem to be consistently disappointed. Starboard Value, an activist private equity firm, sees opportunity in the disparity, calling the company’s shares undervalued. Last year they bought up 7.6 percent of Box’s stock. That’s enough to have an influence over how CEO Aaron Levie runs the company.

Today, according in a filing with the Securities and Exchange Commission, Box and Starboard Capital mutually agreed to add three new members to Box’s board of directors and to force the resignation/retirement of three others — Box co-founder Dylan Smith (he will keep his role as Box’s CFO,) long-time Box investor Rory O’Driscoll, and Josh Stein, who has been on the board for 14 years and will retire.

Two new directors will be joining Box’s board of directors immediately. They include Jack Lazar, whose credentials include being chief financial officer at GoPro. A second board member who is mutually agreed upon by Box and Starboard will also be joining soon. Starboard will select a third board member who will be appointed at Box’s shareholders annual meeting in June.

Box’s board and Starboard Value have each indicated that their mutual goal is to decrease expenditures without affecting the top line. Because Levie has not done that to Starboard’s satisfaction, it is inserting itself not only on DBox’s board but also the boards’s operations team. Will that make a difference?

“Well that always remains to be seen,” says Constellation Research’s senior vice president and principal analyst Holger Mueller. “As any outside director has to be proven, the Starboard team has to as well. Typically the shareholder value drive an activist investor brings can help to bring focus and direction to an enterprise software vendor … but it has to be in a constructive way and with realistic expectations,” he adds.

This may be the where Box was headed anyway. According to Levie Box’s platform is now fully developed and most of its forthcoming sales are expected to come from existing customers suggesting that software development and customer acquisition costs should be substantially lower.

It’s worth noting, that these opinions and trends emerged long before the coronavirus pandemic.

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