Mantle Ridge, an activist hedge fund, has acquired a stake exceeding $1 billion in Cognizant Technology Solutions (NASDAQ:CTSH), signaling its belief that the company's shares are currently undervalued, the Wall Street Journal reported Friday, citing sources familiar with the matter. The report said Mantle Ridge began accumulating shares in the latter half of 2022, when Cognizant's stock price ranged from the high $50s to the low $60s per share.
Since then, Cognizant's stock has experienced an increase, trading at approximately $83 per share, which places the company's market valuation at over $41 billion. Despite this uptick, Mantle Ridge maintains that the shares hold more value than the current market price suggests.
The investment firm has been in private discussions with Cognizant, focusing on strategies to further enhance the company's share price. These talks have taken place in the wake of leadership changes at Cognizant, with Ravi Kumar assuming the roles of CEO and chair in January 2023.
Mantle Ridge is known for its activist approach but has opted for a more subdued strategy with Cognizant, choosing to engage with the company's management rather than seeking public confrontation. At present, the firm does not intend to push for board representation.
The move by Mantle Ridge reflects its confidence in Cognizant's potential for growth and its belief in the intrinsic value of the company's shares. The firm's significant investment and ongoing engagement with Cognizant's management underscore its commitment to realizing this potential value.