By Geoffrey Smith
Investing.com -- The Elliott Effect just hit SAP (DE:SAPG).
The B2B software provider is at the top of the Dax and the Euro Stoxx 50 after early trading on Wednesday, after Paul Singer’s Elliott Management disclosed it has accumulated a $1.3 billion stake in the company via stock and derivatives.
Normally, that could have set Germany’s most valuable company up for a potentially bruising battle with one of Wall Street’s most aggressive activist investors. However, SAP appears to have pre-empted a head-on clash by announcing new targets for profit margins and stock repurchases. They’re designed to reassure investors who have been unsettled by recent high-profile departures and by uncertain progress in migrating its core software business to a cloud-based subscription model.
The new targets more than made up for a quarterly loss caused by restructuring charges and other items related to SAP's expensive-looking $8 billion acquisition of Qualtrics last year. Underlying earnings rose by more than expected, while operating margins from its cloud-based business also improved.
Elliott said it agrees with the strategy, according to newswire reports.
The shares rose as much as 7% to a new all-time high in early trading and were up 6.6% as of 04:30 AM ET (0830 GMT).
SAP was one of two reasons Germany’s DAX was alone in staying in the green early Wednesday, on a day when profit-taking kicked in across Asian and European markets after Wall Street hit new record highs on Tuesday. The benchmark Euro Stoxx 600 was down 0.46 points, or 0.1%, at 390.90.
The other reason for the Dax’s outperformance was payments processor Wirecard (DE:WDIG), which rose over 7% after Japan’s venture capital giant Softbank announced a $1 billion investment. That’s a huge vote of confidence in a company that has been plagued by allegations of false accounting – allegations that it has repeatedly denied.
Quarterly reports from across Europe have also included some other positive surprises: Credit Suisse (SIX:CSGN) rose 2.6% after reporting an 8% increase in net profit in the quarter, while chipmaker STMicroelectronics (PA:STM) rose 3.1% after beating expectations. Pharma giant Novartis (SIX:NOVN) also rose 2.7% as it raised its full-year guidance for core operating profit after a strong first quarter. U.K. fast-fashion group boohoo.com (LON:BOOH) also rose 3.8% after announcing a sharp rise in full-year sales and improved profit margins.