Elliott discloses US$2.5b stake in Texas instruments

The news: Activist investor Elliott Investment Management has disclosed a USD2.5 billion ($3.75 billion) stake in analog chipmaker, Texas Instruments, urging the company to improve its free cash flow.

The numbers: In a letter sent to the board of Texas Instruments disclosing its stake and criticisms of underperformance, Elliott claimed that since Texas Instruments launched a substantial ramp-up in capacity in 2022, its free cash flow has declined by more than 75%. Elliott added that shareholders have been given limited visibility or guidance on when free cash flow per share will return to its historical norm.

The context: According to the Wall Street Journal, Elliot is urging Texas Instruments to adopt a dynamic capacity-management strategy and set a per-share free cash flow target of at least USD9 for 2026, which would be 40% higher than current investor expectations.

Signatories of the letter sent to Texas Instruments include senior Elliott execs Jesse Cohn and Jason Genrich, who believe the key question for Texas Instruments’ management and board is ″not whether TI has a thoughtful long-term strategy but rather: Is the fixed magnitude and pace of its capacity buildout appropriate given the expected level of excess capacity?”