Starboard's Board Shake-Up at BILL Holdings: A Catalyst for Undervalued Tech Revival

Activist investor Starboard Value has emerged as a pivotal force in the corporate governance landscape, leveraging its expertise to reshape underperforming companies into high-value entities. Its recent 8.5% stake in BILL Holdings (NYSE: BILL) signals a strategic bid to catalyze change in the financial automation software sector, where the company’s stock has languished despite robust operational metrics. This analysis explores how Starboard’s governance reforms could unlock value in an undervalued SaaS platform and reignite investor confidence.

The Case for Governance Reform

Starboard’s track record in corporate activism is marked by a focus on boardroom restructuring and operational efficiency. At Darden Restaurants, for instance, the firm secured all 12 board seats after a high-profile proxy contest, leading to a 30% stock price surge within a year [1]. Similarly, its campaigns at Macy’s and Autodesk centered on monetizing real estate assets and streamlining operations, respectively [3]. Now, Starboard aims to replicate this playbook at BILL Holdings, where it has nominated director candidates for the 2025 Annual Meeting [5].

BILL’s current board structure—comprising 12 members with four seats up for election—presents an opportunity for Starboard to install directors aligned with its value-creation thesis. The activist firm’s proposals likely include cost-cutting measures, strategic realignment, and enhanced oversight of executive compensation, all of which could address concerns about mismanagement and stagnation [6].

Undervaluation and Financial Catalysts

BILL Holdings’ valuation metrics suggest significant upside potential. As of Q1 2025, the company reported 19% year-over-year core revenue growth and a non-GAAP operating margin of 19%, outpacing its 2024 performance [7]. However, its price-to-sales (P/S) ratio of 3.6x lags behind the US Software industry average of 5.2x and peer averages of 5.7x [8]. This discrepancy highlights a disconnect between operational performance and market perception, a common target for activist intervention.

The company’s EBITDA margins further underscore its undervaluation. While trailing twelve-month EBITDA stands at 9.46%, fiscal 2025 guidance projects a contraction to 3.24% [8]. This decline, coupled with a 45% year-to-date stock price drop, reflects investor skepticism about BILL’s ability to sustain growth in a competitive SaaS market. Starboard’s $300 million share buyback program, announced alongside its stake, aims to stabilize sentiment, but deeper operational reforms are needed to address underlying profitability concerns [5].

Strategic and Operational Levers

Starboard’s potential reforms at BILL Holdings could mirror its past successes. For example, at Salesforce, the firm advocated for stricter adherence to the “Rule of 40” (balancing growth and profit margins), a strategy that boosted adjusted operating margins by 98% in 2023 [2]. At BILL, similar measures might involve:
1. Cost Rationalization: Reducing overhead costs through automation or workforce optimization.
2. Portfolio Streamlining: Divesting non-core assets to focus on high-margin financial automation solutions.
3. Revenue Diversification: Expanding into adjacent markets, such as AI-driven accounting tools, to capitalize on tech trends.

These steps could improve EBITDA margins and align BILL’s valuation with industry benchmarks. Analysts project a price target of $57.53, implying a 30% upside from current levels [8], but achieving this will require decisive governance changes.

Risks and Counterarguments

Critics argue that activist campaigns can prioritize short-term gains over long-term innovation. For instance, Huntsman Corporation’s board rejected Starboard’s proposed shake-up, citing risks to existing value creation [4]. Similarly, BILL’s founder, a major shareholder, may resist changes that disrupt the company’s strategic vision. However, Starboard’s emphasis on sustainable growth—evident in its campaigns at Kenvue and LivePerson—suggests a balanced approach that harmonizes profitability with innovation [1].

Conclusion

Starboard’s board challenge at BILL Holdings represents a critical juncture for the SaaS sector. By addressing governance inefficiencies and operational bottlenecks, the activist firm could transform BILL from a struggling mid-growth player into a high-performing tech entity. With a P/S ratio 40% below peers and a stock price trading at 20x last year’s EBITDA [5], the company offers a compelling case for activist-driven revival. As the 2025 proxy battle unfolds, investors will watch closely to see if Starboard’s playbook delivers another success story.

Source:
[1] Society Blog - Society for Corporate Governance, [https://connect.societycorpgov.org/browse/society-blog]
[2] CNBC’s full interview with Starboard Value CEO Jeff Smith, [https://www.13dmonitorconference.com/SummitCoverage]
[3] Monetizing Real Estate: A Fund Favorite at Delivering Alpha, [https://www.institutionalinvestor.com/article/2bsv3y27n30sjjvxl6z28/corner-office/monetizing-real-estate-a-fund-favorite-at-delivering-alpha]
[4] Huntsman Files Definitive Proxy Materials and Mails Letter to..., [https://www.huntsman.com/investors/newsroom/news-releases/detail/512/huntsman-files-definitive-proxy-materials-and-mails-letter]
[5] Starboard to launch BILL Holdings board challenge after building 8.5 stake, [https://www.hedgeweek.com/starboard-to-launch-bill-holdings-board-challenge-after-building-8-5-stake/]
[6] BILL Committed to Driving Sustainable, Long-Term Growth..., [https://finance.yahoo.com/news/bill-committed-driving-sustainable-long-235200663.html]
[7] Bill.com Holdings, Inc. - Market Insights Report, [https://www.marketreportanalytics.com/companies/BILL]
[8] BILL Holdings (NYSE:BILL) Stock Valuation, Peer..., [https://simplywall.st/stocks/us/software/nyse-bill/bill-holdings/valuation]