Activist pushes EPAM Systems for buybacks as AI hits its shares

Activist hedge fund Engine Capital is pushing for technology consultancy group EPAM Systems to boost share buybacks or consider putting itself up for sale, after the stock was hit by fears that artificial intelligence could hurt its business model.

Engine revealed its 1.5 per cent stake in a letter to EPAM’s board reviewed by the FT, which argues for the company to take advantage of its depressed valuation by repurchasing between 60 and 80 per cent of its outstanding shares by the end of 2028. Shares in EPAM are down 42 per cent so far this year, giving it a market value of $5.9bn.

EPAM provides outsourcing services to businesses looking to overhaul their technology and software, employing more than 50,000 IT professionals. It was among a host of tech companies hit by a sector-wide sell-off in tech stocks at the start of the year over fears that AI could challenge their business models.

Engine’s stake could be the first signs of a renewed wave of shareholder activism in the tech sector, as hedge funds agitate for companies potentially under threat from AI to make drastic changes or sell themselves.

In the letter, Engine’s managing partner Arnaud Ajdler urged EPAM’s board to use its existing $750mn cash pile, alongside future free cash flows and debt, to dramatically increase its share buyback programme. But if the board opted against more share buybacks or the repurchase programme failed to boost performance, the company should consider a sale.

“If the board lacks the confidence to aggressively repurchase shares at current levels, it should initiate a formal strategic review, overseen by independent directors and supported by a financial adviser, to determine the value that strategic and financial buyers may be willing to ascribe to the company,” wrote Ajdler.

Founded in 2013, Engine, which has roughly $1.5bn of assets under management, has chalked up several recent wins at activist targets, successfully pushing for uniform maker UniFirst’s $5.5bn sale to rival Cintas and the break-up of UK industrials company Smiths Group.

EPAM and Engine did not immediately respond to requests for comment.

Follow the topics in this article

Comments