Activist Investor Starteepo Takes 7.3% Stake in Xerox, Pushes for Review of Financing Arm

Activist investment firm Starteepo has acquired a 7.34% stake in Xerox Corp. (NASDAQ:XRX) and is urging the company's board to conduct a strategic review of its financial services division. The move, reported by Bloomberg News, aims to unlock what the investor sees as significant hidden value within the office equipment manufacturer.

Activist's Demands

Prague-based Starteepo, led by investor Frantisek Bostl, detailed its demands in a letter sent to the Xerox board. The firm is pushing for immediate action to improve the company's financial health and transparency, having built its position between May and July.

Key proposals from the activist investor include:

• A formal strategic review of the company's financing arm, including retaining advisers to explore options such as a joint venture, strategic partnership, or an outright sale.
• Separate financial disclosure for the financing unit, to begin no later than Xerox's third-quarter earnings report.
• Immediate balance sheet deleveraging and the implementation of stricter capital discipline.

The Case for a Higher Valuation

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Starteepo argues that Xerox's financing unit alone could be worth up to $7.69 per share, a figure that is more than double the company's entire market capitalization. The investor believes that altering the unit's capital structure could significantly boost shareholder value.

The firm suggested Xerox could adopt a model similar to peers like HP and General Electric, where a third party provides portfolio funding while Xerox maintains customer relationships. By implementing these and other operational changes, Starteepo projects Xerox’s equity value could reach $3.3 billion, or more than $18 per share.

Market Impact and Historical Precedent

The news follows a challenging period for Xerox, whose shares have declined 13% over the past year, reducing its market cap to approximately $418 million. Following the report, Xerox shares rose 1.8% in premarket trading.

This is not the first time Xerox has faced activist pressure. Famed investor Carl Icahn previously pushed for a corporate split and held board seats before the company repurchased his stake for $542 million in 2023. Investors will now monitor how Xerox's current management responds to this new campaign to catalyze a turnaround.