After weeks of reports that activist investor Elliott Management had taken a sizable stake in Starbucks and is pushing for representation on the coffee chain’s board, Starbucks CEO Laxman Narasimhan confirmed in Tuesday’s Q3 earnings call that Elliott is indeed a shareholder in the company.
Narasimhan remained otherwise tight-lipped about the company’s relationship with Elliott; simply stating that “conversations to date have been constructive.”
Elliott Management is a global hedge fund group headquartered in West Palm Beach, Fla. The company is known for taking activist investor roles in struggling companies. At the same time as the hedge fund has allegedly been in talks with Starbucks, Elliott Management has also been in communications with Southwest Airlines, and in June, sent a letter to leadership strongly recommending that the company completely change its leadership.
The rumors of Elliott’s involvement with Starbucks began a couple of weeks ago, per reports from The Wall Street Journal and Reuters, which stated that the hedge fund manager had taken a sizable, though unknown, stake in Starbucks and was pressuring the company for a seat on the board to help improve its financial performance.
The value of Starbucks shares took a nosedive at the end of April, when the company reported its Q2 earnings, including the news that Starbucks saw negative same-store sales for the first time in three years since the peak of the pandemic. Since then, the stock value had only improved after rumors began of Elliott’s involvement.
According to the Financial Times, Elliott and Starbucks former CEO Howard Schultz have allegedly clashed behind the scenes and are struggling to come to an agreement. Schultz has been outspoken about his criticism of his successor’s leadership at the helm of Starbucks, and implied in a LinkedIn post that the company was biting off more than it could chew, and that leadership should instead be taking a “maniacal focus” on customer experience.
In the latest reports, Elliott allegedly proposed a deal that would involve expanding the board but allowing Narasimhan to keep his job, though Starbucks has apparently not yet responded to the deal, according to CNBC.
Investors taking a more active role in public foodservice companies is not unusual, though they are often pulled in during times of crisis at a company, and it is unclear whether Starbucks’ two disappointing quarters are enough of a backslide to ring warning bells that the coffee chain needs outside help to remain dominant in the coffee sector.
Another example of an activist investor in the foodservice industry is Starboard Value LLP, which has over the years taken active roles in turning around once-struggling companies like Darden Restaurants in 2014, Papa Johns in 2020 after the company struggled to bounce back from its controversial clashes with founder John Schnatter, and most recently, Bloomin’ Brands last year.
NRN reached out to Starbucks for further comment but did not receive a response in time for publication.
Contact Joanna at [email protected]
