Pepsi soft drinks are on display at convenience stores in San Francisco, California.
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PepsiCo’s stocks went in Tuesday after Elliott’s investment management took a big stake as activist investors see “unusual” and “historic” opportunities in the iconic soft drink giant.
PepsiCo shares rose about 4% in morning trading. This year before Tuesday’s Pop, it fell by around 2%, significantly slowing the wider market and its rival Coca-Cola.
According to FactSet, Elliott’s bet on Pepsi, discovered by Paul Singer, is worth $4 billion, making him the top five active investors in the consumer giant except for index funds. Activist investors sent a presentation and letter to Pepsi’s board on Tuesday, detailing a clear agenda focused on regaining business momentum.
“Unfortunately, this disappointing trajectory has created historical opportunities. With the right mindset and the right ambitious turnaround plan, PepsiCo represents an unusual opportunity to stimulate today’s major global companies and unleash important shareholder value,” Elliott wrote in the letter.
The Wall Street Journal first reported Elliott’s new stock earlier on Tuesday.
Elliott wants to work together to help Pepsi build on its legacy of success and achieve its full potential.
“Eliot’s goal at PepsiCo is simple. It helps the company sharpen its focus, promote innovation, become more efficient, and unlock its major brands, unparalleled scale and world-class employees the value they deserve. The path back to victory is clear and achievable.
Pepsi is trying to reduce costs and improve profit margins. The company closed two manufacturing plants in the quarter for its North American food business. Pepsi said it is trying to make transportation and logistics more efficient. The company also evaluates how it spends its marketing dollars to ensure that it makes the most profits from its investments.
In July, Pepsi reported quarterly revenue and revenue that exceeded analyst expectations.
Elliott has a long history of activism, which manages over $70 billion in managed assets and can bring strong profits to investors. It is the large owner of Phillips 66 Airlines and Southwest Airlines, both of which are driving changes.
The company was also well known for its 15-year legal battle with the Argentine government over default bonds. Elliott ultimately received a $2.4 billion settlement payment, representing a massive return on initial investments.
