Microsoft Corporation (NASDAQ:MSFT) came out of a quiet weekend, but even with many analysts and market watchers focused on the Apple Inc. (NASDAQ:AAPL) quarterly earnings report slated for Tuesday, Microsoft is getting its share of headlines Monday morning when it was reported early by CNBC’s David Faber that ValueAct Capital Management, which has about $7.8 billion in its equity portfolio, has made a $2 billion play in the stock.
Granted, ValueAct’s move is large in relation to its overall portfolio (about 25 percent), but in the grand scheme of things, it’s not a gigantic play in comparison to some of the titans of the hedge fund industry. Which makes it so interesting that as news of this transaction broke – though no SEC filing has been spotted as of yet – Microsoft Corporation (NASDAQ:MSFT) stock jumped more than 4 percent to about $31 per share, where it is holding steady around that mark several hours into the trading day.
If this sticks, it would mark the highest point for the stock in several months and puts the stock as a 15-percent gainer already this calendar year.
Based on Friday’s close, ValueAct’s move bought about 67 million shares of the company, but that is still less than 1 percent of the total number of outstanding shares in the company.
Have you heard of ValueAct? It declares its management as experts in determining undervalued stock companies and then implementing strategies with the company’s management and board of directors to increase returns on ValueAct’s investment. The firm is most noted for its move into Gardner Denver Inc. to encourage its sale, which it did for $3.74 billion to private-equity firm KKR.
Might this be a precursor to some major move at the company? Microsoft Corporation (NASDAQ:MSFT) CEO Steve Ballmer has been the subject of criticism by many hedge funds and other investors for most of the last decade since he took over in 2000, and he stayed in charge despite a move by Greenlight Capital’s David Einhorn to try to push him out several years ago. And with Ballmer owning 4 percent of the company’s stock and being the pick of Bill Gates, who owns 5 percent of the shares, it would be difficult to imagine this move by ValueAct ultimately serving any significant purpose on its own.
We might have to watch Microsoft Corporation (NASDAQ:MSFT) stock over the coming days and weeks to see if ValueAct’s investment is a building block toward some bigger play by a consortium – and will that consortium amount to enough to get Gates’ and Ballmer’s attention?
Why do you think a firm like ValueAct would place more than 25 percent of its 13F portfolio into Microsoft right out of the blue? Is this a sign of more to come? We will keep an eye on this tory as it develops, but we’d like your initial thoughts in the comments section below.
DISCLOSURE: I own no positions in any stock mentioned.