What Happened:
Shares of online work marketplace Upwork (NASDAQ:UPWK) jumped 9.5% in the afternoon session after activist investor Engine Capital (owns approximately 3.5% of UPWK shares) sent a letter to its board as part of an effort to drive management to improve shareholder value. Engine Capital believes Upwork's valuation multiple of ~6.5x EBITDA represents a steep discount to its intrinsic value and similar online marketplaces. The activist investor called out several areas of concern, including management's lack of focus, poor execution, and excessive spending. These issues are believed to have caused significant management turnover and missed opportunities to market and sell products under the Enterprise division.
As a result, Engine Capital recommended a number of measures, including a board refresh, cost optimization, and aggressive share buybacks to drive shareholder returns.
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What is the market telling us:
Upwork’s shares are very volatile and over the last year have had 18 moves greater than 5%. In context of that, today’s move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
Upwork is down 29.3% since the beginning of the year, and at $10.15 per share it is trading 35.2% below its 52-week high of $15.66 from January 2024. Investors who bought $1,000 worth of Upwork’s shares 5 years ago would now be looking at an investment worth $677.76.
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