Why The Advisory Board Company Stock Jumped Today

By Jeremy Bowman Markets Fool.com

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Image source: The Advisory Board.

What happened

Shares ofThe Advisory Board Company(NASDAQ: ABCO) were surging today after an activist investor filed a 13D form seeking to engage in talks with the board. As of 11:18 a.m. EST, the stock was up 13.8%.

So what

Elliott Associates, the activist hedge fund run by Paul Singer, disclosed a position equivalent to an 8.3% stake in Advisory Board and said it believes the stock is significantly undervalued. The hedge fund seeks a constructive dialogue with Advisory Board in order to maximize shareholder value.

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Singer's aims with Advisory Board are unclear, but the stock has lost significant value in recent years, down more than 40% over the last three years before today's news.

Now what

Activist positions often give stocks a jolt like this, especially for beaten-down shares likeAdvisory Board's. Management has not yet responded to Elliott Associates, but it will likely agree to talks. From there, Elliott may seek a board shakeup or any number of strategic changes. Advisory Board's profits have fallen significantly over the last five years so it's not a surprise to see an activist investor take such a stake. Expect volatility from the stock as negotiations between the two sides ensue.

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Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.