Activist investor Elliott Investment Management L.P. disclosed a large investment in Goodyear Rubber & Tire Co on Thursday and said it is pushing the company to strengthen its financial position by selling stores and starting an operational review.
Elliott holds a 10% economic interest in the company, making it one of Goodyear’s biggest investors. It is also urging a change in leadership and wants the company to add five new directors to its board.
By selling off the store network, Goodyear could use the money to pay down debt, improve its balance sheet and financial flexibility, Elliott said in a letter to the board, which it made public.
All of Elliott’s proposed changes could increase Goodyear’s stock price by roughly $21 a share to trade in the low $30 range, it said. On Thursday morning, the stock price jumped 16% to trade at $13.60. Over the last five years, the stock price is down 47%.
Elliott, which oversees $55 billion in assets for clients and has a history of taking board seats at companies including Twitter and eBay, said it has identified “experienced executives to spearhead” a board overhaul.
Despite its long history, Goodyear has “failed to deliver on expected financial performance” in the last years and is lagging competitors Michelin and Bridgestone, Elliott said. Market sentiment is “profoundly negative,” leaving the stock to be “orphaned” with only a small number of analysts covering the company, the hedge fund said.
“Our recommendations – enhancing leadership and oversight, monetizing Goodyear’s retail platform, and developing a margin improvement plan – will make Goodyear a better company for its customers, employees and shareholders for decades to come,” Elliott portfolio managers Marc Steinberg and Austin Camporin wrote to the company on Thursday.
Goodyear, which has a valuation of $3.3 billion, did not immediately respond to a Reuters request for comment. (Reporting by Svea Herbst-Bayliss with additional reporting by Nathan Gomes in Bengaluru; Editing by Devika Syamnath and Elaine Hardcastle)