Micro Focus’s slump sees Wall Street activist scoop £4m

Wall Street activist Starboard Value is sitting on a £4 million paper profit after a canny bet to short UK tech group Micro Focus ahead of its shock shares plunge.

Micro, which invests in vintage software, slumped the most in six years on Tuesday after revealing a surprise sales slide at HPE Software, the unit it will acquire this year from US giant Hewlett-Packard Enterprise for $8.8 billion (£6.8 billion).

Starboard, headed by investor Jeffrey Smith, disclosed a 0.68% short position in Micro Focus shares on 25 April, according to UK regulatory filings, two weeks before the announcement.

Shorting the stock at the 25 April price of £25.55 and buying it back at Tuesday’s low of £22.92 would have delivered a £4.1 million profit. Starboard’s bearish position on Micro Focus, which is up 60% since last year, could be linked to its stake in HPE, which is selling the software unit to Micro.

The activist investor, which previously led a successful campaign against Yahoo, revealed a $125 million stake in the group last November, leading to speculation it may push for a shake-up.

Investors often hedge long positions with short positions in other stocks to reduce risk. Starboard did not respond to a request for comment.

Micro Focus declined to comment. HPE said it did not comment on trading activities of investors.

The HPE deal was struck last September.