Starboard Value reveals Autodesk stake, files lawsuit to delay annual meeting

The seal of the Court of Chancery for the State of Delaware is seen on a wall in the Sussex County Court of Chancery in Georgetown, Delaware

(Reuters) -Activist investor Starboard Value disclosed a more than $500 million stake in Autodesk on Monday and sued the design software maker to delay its annual meeting after a recent accounting probe hit its shares.

Its lawsuit, filed in the Delaware Court of Chancery on Monday, seeks to delay the July 16 annual meeting and reopen the company's director nomination window.

The filing, obtained from Starboard, said the board investigation raised "significant concerns" over Autodesk's accounting and disclosure practices.

Shares of Autodesk closed 6.5% higher at the end of the day's trading. The stock declined 7% this year till Friday's close.

The company said in May it had wrapped up the months-long probe into how it handled the accounting of free-cash flow and adjusted margin. There would no reinstatement of its financial statements, Autodesk said.

It also named board member Elizabeth Rafael its interim finance chief, succeeding Debbie Clifford, who took on the role of strategy head.

The investigation began in March, days before the board nomination deadline.

"Autodesk decided, while knowing this material information, not to make any disclosures to shareholders about these issues until April 1, 2024," Starboard Value said in a letter.

It said the findings of the company's investigation also raised "significant questions" about its accounting and disclosure practices, as well as board oversight.

In 2022, Autodesk said it would shift enterprise customers to contracts billed annually from the multi-year upfront billings. However, the company reverted to multi-year upfront contracts in an attempt to raise reported free-cash flow.

The upfront billings of enterprise customers in fiscal 2023 substantially exceeded historical levels, helping Autodesk meet its lowered free-cash flow target.

The company said on Monday it decided that reopening the director nomination window would not be in the best interest of Autodesk or its shareholders.

"Autodesk is confident in this decision and the process followed by the Board, and is looking forward to holding the annual meeting as scheduled," it said.

There are 11 nominees for elections at the annual meeting including GoDaddy's erstwhile CEO Blake Irving and Western Digital's former boss Stephen Milligan.

(Reporting by Priyanka.G and Shivani Tanna in Bengaluru, additional reporting by Leroy Leo; Editing by Sriraj Kalluvila and Pooja Desai)