Activist hedge fund firm Elliott Investment Management has disclosed a stake of more than $2.5bn in chipmaker Texas Instruments, and has written a letter to the company's board urging the business to improve its free cashflow.
In the letter, Elliott proposed that Texas Instruments "adopt a dynamic capacity-management strategy and introduce a free cash flow per share target of $9.00+ in 2026." In doing so, Elliott believes that TI can re-establish itself as a "compelling" investment, also benefitting from "a strong cyclical recovery in the analog market."
According to LSEG data, the company's free cash flow fell 77% to $1.47 per share in 2023.
"TI's shareholder returns have lagged peers consistently over a multi-year period," Elliott wrote, "despite TI's reputation as one of the best-managed semiconductor companies with strong growth prospects and competitive advantages."
The firm continued: "Our diagnosis is simple: investors are concerned that TI appears to have deviated from its longstanding commitment to drive growth of free cash flow per share."
Elliott's letter stated that its "recommended path forward embraces TI's long-term recipe for success and re-establishes its long-held commitment to its shareholders."
Elliott concluded that it believes "in the strategic merit of American semiconductor manufacturing leadership," and that "TI is positioned as the only analogue company with proven industry leadership and proven technology to achieve this goal at scale."
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