Elliott Management Takes Activist Stake in Riverbed

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Nov. 11 (Bloomberg) -- Bob Rice, general managing partner with Tangent Capital Partners LLC, discusses Elliott Management's stake in Riverbed. Rice speaks with Deirdre Bolton on Bloomberg Television's "Money Moves." (Source: Bloomberg)

Details about this company.

And they are a gear maker, a network infrastructure company.

They make a lot of stuff which accelerates the speed at which your local network runs.

Like a lot of companies in this space, even big names like cisco and ibm, that part of its business is coming under a lot of pressure because of the cloud solution providers.

People simply plugging in rather than buying their infrastructure.

This goes back 52 weeks?

No, this is just a five-day chart.

You can see that sudden spike when elliott's stake was announced last friday, the stock jumped 13%. this is good old-fashioned corporate drama.

The company has put in a poison pill this morning, reducing the chance of a takeover for further investment, so the stock is come down a bit.

This follows the larger theme that we were discussing earlier, activist investing.

It has been an active year for activist managers.

This is one of the top- performing hedge fund strategies for a significant period of time, attracting a lot of institutional capital.

Some of the reasons behind this are not obvious.

You might think it is random.

It is very interesting to look at where we are in the cycle and understand what that means for why we are getting so much institutional interest.

Ok, so why?

Over the last few years, companies have cut their cost to the bone, maximize their operating leverage as much as they can.

Cash on the balance sheet, for what it is worth.

Larger companies have tons of cash on the balance sheet.

Multiples have expanded as far as many people think they can go.

Whether you are a corporate manager or investment firm manager, you are starting to see , where can i get further upside from my equities?

A lot of the answer is in strategic opportunities, where the activist are big.

That is part of the platform, part of why carl icahn says you can do better for your investors.

You are making your own alpha.

This is active alpha in its purest form.

You buy some shares, announced them, and the stock is up 13%. in their particular case -- and it is an interesting question.

What elliott says is you have a lot of hard-core users that love you, and you are critical to their businesses, with the implicit message, we think you can extract more cash out of your current customers, even if the longer-term trends will diminish new sales to new customers.

I am thinking of riverbed, a tech company, but transocean, apple has been in play.

There has been a range.

And you will see more of this.

Strategic options will become more important not just for the average activist, but for the more general and-driven manager.

A lot of corporations are saying, the only way i can expand my user base is through acquisition.

The only way i can do r&d anymore -- which they do not do anymore like they used to, they look to outsourcing to smaller companies.

These event-driven managers have really become the darlings of the institutional seen over the last year or so.

Thank you as always, bob rice.

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