Engine Capital urges EPAM to launch buyback or explore sale
Activist investor Engine Capital is pressing EPAM Systems to take decisive action to address a sharp decline in its share price, calling on the IT services company to pursue an aggressive stock buyback or consider putting itself up for sale, according to a report by Bloomberg.
Engine Capital, an activist investor with a 1.5% stake in EPAM Systems, is urging the IT services company to take immediate action amid a 40% drop in its stock price this year. In a letter to EPAM's board, Engine's managing member, Arnaud Ajdler, argues the company's performance has lagged behind both peers and the broader IT services sector.
Engine proposes EPAM utilize its $750 million cash reserve, future free cash flow, and borrowing capacity to fund aggressive stock buybacks, potentially acquiring between 60% and 80% of its outstanding shares by the end of 2028. The hedge fund is also pushing for changes in governance, such as adding independent directors and forming a dedicated capital allocation committee.
Engine's primary request is for EPAM to speed up its buyback program, demonstrating how this strategy can boost shareholder returns. If the company fails to act or buyback attempts prove ineffective, Engine wants EPAM to conduct a formal strategic review overseen by independent directors and supported by an external financial adviser. The review could result in a potential sale of the company.
EPAM's shares have been affected by investor concerns over AI disrupting established business models and reducing demand for traditional IT services. However, Engine contends EPAM's performance has been especially weak compared to its peers.
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