Western Digital Jumps 12% As Activist Investor Elliott Calls For Separation Of Flash Biz

Shares of Western Digital Corporation (WDC) are gaining nearly 12% on Tuesday morning after activist investor Elliott Investment Management urged the company to separate its Flash business. Elliott also offered to invest $1 billion to facilitate a sale or a spin-off of the business.

WDC is currently trading at $60.16, up $6.24 or 11.57%, on the Nasdaq, on a heavy volume of about 7 million shares, above average volume of 3.7 million. The stock opened its trading at $60.04 after closing Monday’s trading at $53.92. The stock has traded between $43.85 and $78.19 in the past 52 week period.

Elliott Investment sent a letter to the Board of Directors of Western Digital asking the Board to conduct a full strategic review of the value that could be created by separating its two vastly different businesses, hard disk drives and NAND flash memory.

According to the letter, Western Digital has underperformed—operationally, financially and strategically—as a direct result of the challenges of operating both the HDD and Flash businesses as part of the same company.

In its letter, Elliott argued that a full separation of the Flash business would allow both HDD and Flash to be more successful while also unlocking significant value. By executing on a separation, Elliott believes Western Digital’s stock price could reach $100+ per share by the end of 2023, representing uniquely attractive upside of approximately 100%.

Elliott is also offering over $1 billion of incremental equity capital into the Flash business at an enterprise value of $17 to $20 billion.

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