Cars.com (CARS) - Get Report shares surged Thursday after the online car shopping service said it may explore a sale of the company, just weeks after activist investor Starboard Value pressed management to improve performance.
Starboard Value, which owns around 9% of the Chicago-based group, told management in a letter published on December 10 that Cars.com had been losing customers for the past two years, leading to a decline in organic revenues. Rising costs, Starboard said, resulted in a "pattern of missed expectations and lowered guidance." Starboard said that, unless management is able to turn things around, "we believe it would be incumbent upon the Board to take more substantive actions to ensure that the value of the Company is maximized."
"We are confident in the Company's strategy to expand from a classified listings model into a leading online automotive marketplace solutions provider," said Cars.com chairman Scott Forbes. "We have undertaken a number of actions toward positioning the Company to drive growth and achieve sustainable market leadership in our sector."
"We remain committed to that plan, but in light of multiple inquiries which indicate the possibility of realizing that future value now, and after careful consideration, we took the decision to explore strategic alternatives in late 2018, consistent with the Board's commitment to acting in the best interests of the Company and its stakeholders to enhance shareholder value," he added.
Cars.com shares rose 6.7% on Thursday to $24.71.