Fir Tree, founded by Jeffrey Tannenbaum, has revealed in a recent 13D filing that it has further cut its activist position in CDK Global Inc (NASDAQ:CDK), to 10.72 million shares, accounting for 6.7% of the company’s outstanding common stock. That amounts to a decrease of about 750,000 shares since June 30, based on the reported holding of Fir Tree as of that date, courtesy its latest 13F filing.
Fir Tree was founded by Tannenbaum in 1994 and is based in New York. The fund manages a public equity portfolio valued at $6.28 billion as of June 30, and primarily invests in technology and healthcare stocks, which accounted for 49% of its portfolio on that date. The firm’s public equity portfolio shed a noteworthy chunk of its holdings in the first six months of the year, having contained over $9.59 billion in equities at the end of 2014.
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CDK Global provides a wide range of resources to the automotive industry, including front-end and business office solutions for auto dealerships, and even a social media solution called ADP Social Media, which helps dealerships reach out to and connect with customers. The latest sale by Fir Tree continues the trend of it trimming its position in its top pick. Fir Tree opened a position in CDK Global Inc (NASDAQ:CDK) during the fourth quarter of 2014, shortly after the company was spun off from Automatic Data Processing (NASDAQ:ADP). The position, first revealed in early November, consisted of an even 14.0 million shares, amassing 8.72% of the company’s common stock. That was bumped up to 14.2 million shares by the end of the year. However Fir Tree has since shed shares in the each of the past two quarters, selling about 1.35 million shares in the first quarter, and another 1.33 million shares in the second quarter. Of further note is the fact that Fir Tree changed its position from passive to activist in December. Despite only recently having been spun off as a separate public company, CDK Global is now reportedly seeking a deal from a private equity firm to take it private.
The sales are not entirely surprising and are likely little more than profit taking, as CDK Global Inc (NASDAQ:CDK)’s stock has appreciated by over 65% since its IPO in late September, and grown steadily throughout the year until the current quarter, during which it has declined slightly. Fir Tree was the second fund in our database to have taken a large position in the new company in late 2014 following on the heels of Scott Ferguson‘s Sachem Head Capital taking a large stake of 12.65 million shares in early October. Sachem Head Capital holds nearly the same-sized position through June 30, with over 45% exposure to the stock in its public equity portfolio, which contains just six positions.
While Sachem Head Capital has remained stalwart, the smart money appears to collectively be leaning on the side of caution now after the steady gains, with 44 hedge funds tracked by Insider Monkey holding $2.83 billion in CDK Global Inc (NASDAQ:CDK)’s shares on June 30, only a marginal increase from the $2.79 billion in shares that 45 funds held on March 31, and that during a quarter in which the stock gained over 15%. This suggests that there was a notable sell-off of about $400 million worth of shares during the quarter by the funds we track, of which Fir Tree’s sales account for only a small portion of. The declining sentiment has been proven correct thus far, as shares are down by 5% in the third quarter.
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