Upwork shares rise after activist investor reveals stake, calls for board changes

Investing.com -- Shares in Upwork (NASDAQ:UPWK) advanced on Friday after activist investor Engine Capital said it had about a 3.5% stake in the freelance outsourcing company and called for a shake-up of the group's board.

In a letter to Upwork, Engine Capital flagged that several "foundational issues" need to be addressed by the company's leadership.

"Instead of pursuing a clear, consistent strategy and committing the necessary resources behind it, the Company appears unfocused and unable to prioritize initiatives," Engine Capital wrote.

It added that it had spoken with former employees who said Upwork's leadership had adopted a "scattershot approach" to product development, "with engineering resources spread too thin because too many projects are being pursued simultaneously."

Poor operational execution, a lack of financial discipline and "significant management turnover" were also cited as reasons for concerns, Engine Capital said -- although it did not call for the removal of Upwork's current Chief Executive Officer Hayden Brown.

Rather Engine Capital said it believed a "refresh" of Upwork's board was necessary, arguing that the lengthy tenures of Chairman Thomas Layton and Greg Gretsch in particular "go against best practices." Numerous business relationships between various directors could also impact their "independence," Engine Capital said.

Engine Capital also said there was "not a single director" on the board with "relevant" experience in the staffing industry.

Upwork did not immediately respond to a request for comment from Investing.com.

The company's share price has fallen sharply since touching its highest level in 2021, when a pandemic-driven wave of remote working boosted demand for freelance labor. So far this year, Upwork's stock price has slipped by about 30%.

In August, the California-based business, which was formed in 2013 after the merger of Elance and oDesk, posted its highest-ever quarterly net income. However, Upwork slashed its full-year revenue guidance, citing softer sales demand and broader economic challenges.