Activist Investor Elliott Investment Management Takes Significant Stake in Starbucks
Activist investor Elliott Investment Management has built a sizable position in Starbucks (SBUX.O) and is engaging in discussions on ways to enhance the coffee chain's stock performance, according to two sources familiar with the matter. The news comes as Starbucks' stock, which has declined 23% over the past year, saw a nearly 7% jump to close at $79.27 on Friday.
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Starbucks' stock experienced a notable increase following the revelation of Elliott's involvement, signaling investor optimism about potential changes. Over the past 52 weeks, Starbucks' stock had taken a hit, particularly in April, when the company reported a drop in same-store sales for the first time in nearly three years and lower-than-expected profits. The disappointing earnings led Starbucks to reduce its annual sales forecast.
The coffee giant has been grappling with weaker demand in its two largest markets, the United States and China, contributing to its recent financial struggles.
The poor earnings report prompted former CEO Howard Schultz to advocate for an overhaul of Starbucks' U.S. operations. Schultz, a major shareholder, shared his concerns on LinkedIn, emphasizing the need for significant changes.
Howard Schultz, who has served as Starbucks' CEO three times, stepped down from the company's board in 2023.
Laxman Narasimhan, a former PepsiCo executive and Reckitt Benckiser CEO, was appointed as the new top executive, bringing a fresh perspective to the company’s leadership.
The Wall Street Journal first reported Elliott's new stake, noting that the activist hedge fund and Starbucks have been holding private discussions over the past few weeks. Both Starbucks and Elliott declined to comment on the matter. Elliott Investment Management, which managed $65.5 billion in assets as of December, has a track record of pushing for changes in major companies.
In 2024 alone, the hedge fund secured board seats at Etsy (ETSY.O), Phillips 66 (PSX.N), and Match (MTCH.O), and is currently advocating for changes at Southwest Airlines (LUV.N). Additionally, it launched campaigns at Texas Instruments (TXN.O) and Johnson Controls (JCI.N) earlier this year.
Labor Relations:
The news of Elliott's involvement comes months after a coalition of labor unions ended its boardroom battle with Starbucks. The company agreed to work toward reaching labor agreements in response to ongoing unionization efforts that began in 2021, with workers pushing for better pay and working conditions.
The Strategic Organizing Center (SOC), a coalition of North American labor unions, had urged investors to elect three of its director candidates to Starbucks' 11-member board. This campaign marked a significant moment on Wall Street, as it was the first time a labor union employed strategies typically used by hedge funds to seek board seats at a corporation.
The involvement of Elliott Investment Management in Starbucks presents an opportunity for the coffee chain to address its current challenges and improve its stock performance. As discussions between the hedge fund and Starbucks' leadership continue, stakeholders will be watching closely to see how potential strategic changes unfold. With a new CEO at the helm and a powerful activist investor pushing for improvements, Starbucks is poised for a transformative period aimed at revitalizing its business and restoring investor confidence.
