Activist investor Elliott Management says that Western Digital’s flash memory business alone could be worth as much as the whole company now.
Dreamstime
Western Digital stock, after an early pop, is sliding after the maker of hard disks for computers said will consider splitting itself in two as activist investor Elliott Management had recommended.
Western Digital (ticker: WDC) may divide itself into a company for traditional hard drives and another for flash memory, it said in a statement late Tuesday. Elliott has argued that the flash drive business alone could have a value of as much of $20 billion, similar to Western Digital’s current market capitalization.
In May, Elliott said it had built a 6% stake in Western Digital, equivalent to about $1 billion, and said that the benefits of Western Digital buying SanDisk in 2016 for $19 billion haven’t been realized. It is offering an additional $1 billion of equity capital to help spin off or sell the flash unit.
“We are actively engaging in a broad range of strategic and financial alternatives that will help further optimize the value of Western Digital, including Elliott’s offer to invest incremental equity capital in our Flash Business,” Western Digital Chief Executive David Goeckler said.
Japanese chip maker Kioxia is still open to a possible deal with Western Digital, The Wall Street Journal reported, citing people familiar with the matter. The two companies have been in discussions since early 2021, but talks stalled in part because of the decline in Western Digital’s shares.
Western Digital stock has dropped 3.6% at 2:04 p.m. after gaining 4.1% in premarket trading Wednesday. Shares have fallen 7.5% in 2022 and more than 19% over the past year.
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