Key Takeaways
- Activist investor Elliott Investment Management called on Texas Instruments to take steps to boost its free cash flow.
- Elliott said it has a $2.5 billion stake in the chipmaker, and wants it to increase free cash flow to at least $9.00 per share in 2026.
- Elliott argued TI has underperformed because of an increase in capital expenditures announced in 2022.
Texas Instruments (TXN) shares edged higher Tuesday after activist investor Elliott Investment Management announced it had a $2.5 billion stake in the chipmaker and called on management to improve free cash flow.
In a letter to the board, Elliott said the company should “adopt a dynamic capacity-management strategy,” which included targeting a free cash flow of $9.00 or more per share in 2026.
Elliott Hopes TI Will Re-Establish Itself as ‘Compelling’ Investment
The investor added that it believes by taking that step, Texas Instruments would be able to re-establish itself as a “compelling” investment, and take advantage of “a strong cyclical recovery in the analog market.”
Elliott complained that TI has underperformed, mainly because of a “dramatic increase in capital investment announced in 2022,” which it argued led to “a fundamental deviation from TI’s long-held commitment to driving growth in free cash flow per share.”
The letter, signed by Managing Partner Jesse Cohn and Partner and Senior Portfolio Manager Jason Genrich, concluded by saying Elliott looks forward to discussing its proposals with the board and management team, and hopes to hold a meeting in the next several weeks.
Texas Instruments shares edged 0.4% higher to $199.99 as of 12:28 p.m. ET Tuesday after setting a new all-time high of $206.00 earlier in the session. They’re up about 17% year-to-date.