Elliott Investment Management Takes Stake in Starbucks

Activist investor Elliott Investment Management has built a sizable position in Starbucks and has been discussing ways of improving the coffee chain’s stock performance, two sources familiar with the matter told Reuters on Friday.

Stock Performance and Recent Developments:

Starbucks’ stock price, which has lost 23% over the last 52 weeks, jumped nearly 7% to end trading at $79.27 on Friday. The stock price hit in April when Starbucks, the world’s biggest coffee company by location and sales, reported a drop in same-store sales for the first time in nearly three years.

Starbucks also reported lower-than-expected profit as it grapples with weaker demand in the United States and China, its two largest markets. The disappointing earnings report led the company to cut its annual sales forecast.

Howard Schultz’s Call for Change:

The earnings report also prompted former Starbucks CEO Howard Schultz, one of its biggest investors, to write on LinkedIn that the coffee chain needs to overhaul its U.S. operations. Schultz, who had been Starbucks’ CEO three times, stepped off the company’s board in 2023, a few months after it tapped Laxman Narasimhan, a former PepsiCo executive and Reckitt Benckiser CEO, as its top executive.

The Wall Street Journal first reported Elliott’s new stake and said the activist hedge fund and coffee chain have been holding private discussions in the last weeks. Starbucks and Elliott declined to comment.

Labor Union Dynamics:

Elliott’s push for change comes just months after a coalition of labor unions ended its boardroom fight at Starbucks after the company agreed to work toward reaching labor agreements.

Starbucks workers have been working to unionize since 2021, pushing for better pay and working conditions. The Strategic Organizing Center (SOC), a coalition of North American labor unions, had urged investors to elect three of its director candidates to Starbucks’ 11-member board.

Broader Implications and Elliott’s Influence:

The fight was closely watched on Wall Street because it marked the first time a labor union used tools traditionally employed by hedge funds to push for board seats at a corporation.

Elliott, who has won board seats at Etsy, Phillips 66, and Match in the first half of 2024, is currently pushing for changes at Southwest Airlines. It also launched campaigns at Texas Instruments and Johnson Controls earlier this year.

The hedge fund oversaw $65.5 billion in assets at the end of December.