The Briefing: Box Tries, Again, to Appease Activist Shareholder

Activist investors generally get favorable treatment from the business media, which likes to portray them as saviors riding in on a horse to rescue shareholders from poor management. While there are clearly situations where activists force much-needed changes that benefit all shareholders—eBay’s makeover under activist pressure comes to mind—there are plenty of times when that doesn’t happen. Check out what Starboard Value has wrought at Box today.

The cloud storage and file-sharing firm is raising $500 million in convertible preferred stock from KKR so it can buy back $500 million worth of shares. It’s a pricey way to buy back shares. The preferred stock to be issued to KKR comes with a 3% dividend, which is expensive at a time of 0% convertible notes. And while the buyback will give Box’s shares a short-term lift, pleasing Starboard, the convertible preferred stock will eventually offset the impact. As the preferred convert to common, Box will simply replace one bunch of shares with another, slightly smaller bunch. When all is said and done, this transaction won’t do anything to lift Box’s stock out of torpor it’s been in for years.