Elliott Management says GSK has 45% upside after years of underperformance

imageStock Markets8 hours ago (Jul 01, 2021 08:00)

© Reuters.

By Samuel Indyk

Investing.com – Hedge fund Elliott Management has released a 17-page letter to the GlaxoSmithKline (LON:GSK) chairman and board of directors, saying the company has underperformed for years and has an opportunity to generate up to 45% upside in its share price.

This is the first time the hedge fund has confirmed it has built a stake in GSK, after reports surfaced in April that the activist investors were potentially looking to shake things up.

The hedge fund has refrained from calling for an exit for Chief Executive Emma Walmsley but has said an assessment of the board and management is required.

Elliott has called on the company to add biopharmaceutical and scientific experience to its board before executing the announced separation of its Consumer Health division and Biopharma unit.

Once a new board is in place, Elliott believes they should then run robust processes for selecting the best executive leadership for the new Biopharma unit and the Consumer Health division, considering both internal and external candidates.

“Elliott is not advocating a specific outcome but is arguing for a robust process, because it is critical that the Board assure current and future shareholders that the new leadership of both companies was selected through a credible process that conforms to corporate governance best practices,” the hedge fund said in its letter to the chairman and board of directors.

Elliott also believed GSK should explore linking a portion of compensation to longer-term financial guidance for the executive team.

“We recommend that New GSK targets a 32% operating profit margin by 2026 and that this target is incorporated into management’s incentive plans,” Elliott Management said.

AT 08:36BST, shares in GlaxoSmithKline were trading higher by 0.8% at 1,430.69 pence per share.

Elliott Management says GSK has 45% upside after years of underperformance

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