Activist investors at hedge fund Starboard Value LP are unhappy that the company Box has not aggressively titled enterprise trends driven by the COVID-19 pandemic. Box continues to defend this pressure coming from Starboard Value LP.

In a statement on May 10, 2021, Box said that Starboard’s bid to add members to the Box board is not warranted considering the recent growth trends and the USD 500 million investment it received from KKR.

“Therefore, in accordance with the Company’s governance deadlines and in order to preserve our rights as stockholders, we have delivered a formal notice to Box nominating four highly qualified director candidates (the “Nominees”) for election to the board at the Annual Meeting,” Starboard wrote in a public letter to Box.

Box said in a press release that the board as currently constituted categorically rejects this attempt by Starboard to take up additional seats.

“The Box Board of Directors does not believe the changes to the board proposed by Starboard are warranted or in the best interests of all stockholders. The Box Board has been consistently responsive to feedback from all of its stockholders, including suggestions from Starboard, and open-minded toward all value enhancing opportunities. Furthermore, Starboard’s statements do not accurately depict the progress Box has made,” the board wrote in a statement.

The company also said that the board was rebuilt with three new members after taking approval from Starboard.

Starboard is taking action to grab a higher stock price and to seek more growth from Box. These activist investors often get in and try to extract value by brute force when they see that the company is not performing well.

“Box is in the strongest financial position of its history, serving more than 100,000 customers around the world while continuing to build on its well-established leadership position,” Box said in a statement. “The company is on track to deliver the vision of the Content Cloud, reflecting significant innovation, a strengthened partner ecosystem, and an expanded product portfolio. Box also has a clearly defined plan to accelerate revenue growth while driving further margin improvement.”

Box is in the middle of executing a transition and growth strategy that intends to position the company as the cloud layer for content management via integrations with record systems in the enterprise. The company has identified substantial progress seeing the efforts done in fiscal 2021, marking revenue as USD 771 million and an 11% increase every year.

“[Box] made several poor capital allocation decisions, including its recent entry into a financing transaction that we believe serves no business purpose and was done in the face of a potential election contest with Starboard at the 2021 Annual Meeting of Stockholders.”

Nonetheless, Starboard is putting pressure on Box and appears to be positioning for the takeover of the Box board. The investment company might intend to see the firm acquired, but Box wants to remain a standalone company.

“With a more efficient and productive go-to-market strategy, and customer momentum underway, Box is primed to capture a $55-billion market opportunity,” Box said in its statement. “The company has set long-term financial targets, and the Board and management remain confident in Box’s ability to grow revenue between 12% to 16% and achieve operating margins of between 23% to 27% by fiscal 2024.”