The share price of website building and management platform company Wix (Nasdaq: WIX) is currently up by over 8%, following the announcement that the company’s board of directors has authorized a share repurchase program, under which the company may repurchase up to $300 million of its ordinary shares. It is not unlikely that the reason for the move is pressure from activist investor Starboard Value, which revealed last month that it had reached a 9% holding in Wix.
"This repurchase program, as well as last year's $200 million share repurchase along with other initiatives, demonstrates the Board's ongoing focus on offsetting dilution associated with stock-based compensation, reducing share count over time and increasing shareholder value," Wix’s announcement states.
"We remain confident in our ability to generate free cash flow as laid out in our three-year plan, enabling us to continue to invest in our strategic initiatives while also returning capital to shareholders. We have built a healthy balance sheet and believe that our current stock price represents an attractive valuation for a repurchase," said Wix CEO Lior Shemesh. "This new program further demonstrates our ongoing commitment to managing dilution as part of our capital allocation priorities and increasing shareholder value."
In a presentation at an investor conference this week, Starboard Value gave indications of the direction in which it would like to see Wix going.
Starboard has not made specific demands of Wix’s management, but the presentation focuses on the headcount at the Israeli company (nearly 6,000 at the end of 2021), from which the general direction can be understood: an expectation of a more extensive streamlining program than the one presented by Wix last July.
Starboard Value bought Wix shares starting at the end of July at prices ranging between $60 and $73, and at the same time carried out transactions in options. The report that the fund had invested in the company helped boost Wix’s share price to $85, but it has since weakened again, closing at $72.70 yesterday, which gives a market cap of $4.2 billion. This represents a decline of 79% from the peak reached in early 2021, against a background of high demand for the company’s services during the Covid-19 pandemic, as businesses sought to bolster their online presence.
Published by Globes, Israel business news - en.globes.co.il - on October 20, 2022.
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