Will Expiry Of Akamai’s Contract With Elliott Management Impact Akamai’s Stock?

In December 2017, activist investor Elliott Management took a 6.5% stake in Akamai Technologies (NASDAQ: AKAM). Along the lines of Elliott’s modulus operandi, the fund had pointed to the business strength in Akamai’s widespread network and expected Akamai management to fulfill the potential of its network reach. Accordingly, Elliott signed an agreement with Akamai with stated milestones to be achieved. This agreement will expire at the end of March 2019.

In the penultimate quarter before the expiry of the agreement between Elliot and Akamai, there were rumors of Elliott selling some of its stake. However, with data out recently, it appears Elliott has added over 383K shares. We estimate that if Elliott does not add any more shares and completely exits its Q4 2018 position in Akamai’s stock at an average price of $70 (about in line with the current market price) by the end of Q1 2019, the fund could realize an IRR of about 13.7%, which is in line with Elliott’s long term CAGR.

Our interactive dashboard on Elliott’s Estimated Returns From Its Akamai Investment outlines our estimates. You can modify any of the key drivers to visualize the impact of changes on its valuation, and see all of our information technology data here.

After entering Akamai in the December 2017 quarter, Elliott trimmed its position in the stock in the March 2018 quarter. Its position remained constant until the September 2018 quarter, before the fund increased its holding again in the December 2018 quarter. Elliott is known to coax management teams into setting and delivering ambitious goals via specific contracts. It will be interesting to see whether Akamai reaches these targets at the end of March, and whether Elliott starts to trim its stake in the company.

Do not agree with our forecast? Create your own price forecast for Akamai Technologies by changing the base inputs (blue dots) on our interactive dashboard.