Supply chain software provider E2open, with a new CEO in place and Elliott Investment Management still holding a significant stake in the company, is initiating a “strategic review” on its future.
The announcement Thursday morning sent the company’s stock price climbing. At the close, E2open’s stock on the Nasdaq was $4.33 a share, up 6.91% on the day but more importantly, up 101% from its recent low of $2.15 on Oct. 11. Its intraday high Thursday was $4.57.
Andrew Appel, who had the interim tag taken off his CEO title in February, suggested in a prepared statement that the review should not be viewed as a step before E2open sells itself to another buyer. “We remain highly confident in our ability to execute this growth plan and in e2open’s potential as a stand-alone company,” Appel said.
Appel replaced Michael Farlekas, who was ousted in October.
Looming in the background for launching the strategic review is the 13.8% stake in E2open (NASDAQ: ETWO) taken by Elliott Investment Management in October. That stake, according to a 13D filing with the Securities and Exchange Commission, was a combination of about 9% equity ownership and the balance held as options to buy more shares in the company.
In its filing announcing the stake in E2open, the management company said E2open shares are “undervalued” and that it would engage in discussions with E2open management.
Possible outcomes from the discussions, Elliott said in that filing, were “potential changes in operations, management, organizational documents, composition of the Board, capital or corporate structure, sale transactions, dividend policy, strategy and plans.” The company does not pay a dividend.
“As responsible stewards for our stakeholders, we are undertaking this strategic review to explore a full range of options to further accelerate growth and value creation,” Appel said.
The statement released by E2open added that there is no deadline for the completion of the review, “and there can be no assurance that this process will result in any particular outcome.”
The company said there would be no further comment on the review until it’s completed.
That echoed what CFO Marj Armstrong said in January on the only quarterly earnings call with analysts held since the Elliott stake was disclosed. “E2open routinely engages in ongoing and collaborative dialogue with shareholders, and our board and management team are committed to evaluating all potential pathways to maximizing shareholder value,” Armstrong said, before adding that there would be no further comment on the action by Elliott Management.
Elliott’s website says that as of the end of 2023, it managed about $65.5 billion in assets.
In the statement announcing the strategic review, E2open Chairman Chinh Chu was quoted as saying that the new team led by Appel “has already made progress executing a comprehensive and customer-centric plan to drive growth and innovation.”
The review announcement also affirmed E2open’s earlier projections for the full fiscal year that ended Feb. 29. That guidance was subscription revenue of $533 million to $536 million, GAAP revenue of $628 million to $633 million and adjusted earnings before interest, taxes, depreciation and amortization of $215 million to $220 million.
But while that is an affirmation of the most recent guidance, it is down from what was first projected May 1, 2023 when fourth-quarter earnings for the prior fiscal year were released.
At that time, full-year subscription revenue for fiscal 2024 was projected to be $545 million to $555 million, revenue was to be $655 million to $670 million, and adjusted EBITDA was projected as $218 million to $228 million.
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