American Express has secured a major investor that is reportedly taking a $1 billion stake in the company, sources close to the matter told Bloomberg.
That investor is ValueAct Capital Management, an activity fund reportedly attempting to help Amex position itself better among shareholders looking to back the issuer. ValueAct's investment would be less than a 5 percent stake, but even the news of the investment helped give its stock a boost. In fact, Amex's stock increased 6.3 percent late Friday to $79.72, giving it a market value of $80 billion, Bloomberg reported, noting that that was its biggest jump in four years.
“It’s a perfect opportunity. American Express is ripe for an activist to take a sizable stake,” Stephen Biggar, an analyst at Argus Research, told Bloomberg. “The stock has taken a big hit.”
But change may be in store for Amex soon.
“ValueAct is a well-respected firm,” said Marina Norville, a spokeswoman for Amex, told Bloomberg. “We have been speaking with them, as we do with other investors, and look forward to continuing a constructive dialogue. At American Express, we are focused on building long-term value for shareholders and are always open to the views and perspectives of our investors.”
Amex has had a tough couple years, and CEO Ken Chenault has been under the spotlight to show how the company can deliver following a few big bumps in the road, which includes axing the partnership with Costco in both the U.S. and Canada. It's also been under pressure following the antitrust ruling that could impact how Amex charges merchants. Amex has also faced slower spending rates, and revenue goals have fallen short.
According to Bloomberg, ValueAct has played a major role in helping public companies implement their strategies, including Microsoft, Gardner Denver, Valeant Pharmaceuticals International, Reuters Group, Adobe Systems and Sara Lee. What's interesting about this investment — according to Scott Valentin, an analyst with FBR Capital Markets — is that activists don't commonly look to invest in financial firms because of the stringent regulations, such as the Fed having to approve capital plans.