🔒WEX defends business strategy against activist investor

WEX Inc. (NYSE: WEX), the Portland-based financial technology company dogged by a lackluster share price, defended its business strategy against an activist investor seeking a board shake-up. The shareholder, Impactive Capital, owns 4.9% of WEX shares and is calling for the replacement of three WEX board members, including Chair and CEO Melissa Smith, at next week’s annual shareholders meeting. Impactive is a hedge fund based in New York. WEX posted first-quarter earnings and revenue last week that surpassed market expectations and raised its full-year financial outlook. Once a high-flyer on the stock market, WEX shares have fallen 17% in the past three years while the Standard & Poor’s 500 index has climbed more than 75%. Shares closed at $149.10 on Monday, giving the stock a market value of around $5.2 billion. Over the past year, shares have fluctuated between a low of $120.03 and a high of $180.71. In an online presentation on Monday, Smith said that WEX has done its best to be responsive to the hedge fund’s demands over the past five years and taken action “where Impactive’s feedback was consistent with our perspective.” WEX provides fintech services to businesses in fleet mobility and fueling, corporate payments, travel industry payments and benefits, including health savings and flexible spending accounts.

'Not a broken company'

In a 164-page investor presentation shared on Monday’s call, WEX noted that after Bank of America and J.P. Morgan evaluated Impactive’s proposal to spin off the company’s benefits business, the board concluded that the business units are stronger together. The division makes up around 30% of WEX’s annual revenue. David Foss, a former CEO of Missouri-based fintech provider Jack Henry & Associates (NASDAQ: JKHY) who recently joined WEX’s board, joined Smith in Monday’s call. He said that while WEX is executing its business strategy well, “certainly we’re not satisfied with the stock price." “We understand that,” Foss said, “but I think it’s also important to recognize that in our sector —  the payments sector — many companies have been going sideways here for a little while.” “This is not a broken company,” he added. “This is a company that is functioning well with terrific leadership, and is delivering for our customers and long-term for our shareholders. Likewise, I would emphasize this is not a broken board."