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Starboard Value has confirmed two-month-old reports that it would nominate more directors at cloud company Box, writing in a Monday letter that “execution has fallen well short of expectations” and calling two recent financings “unnecessary.”

The activist investor, which settled for two spots on the board and a mutually agreed director in March last year, said on Monday that it had agreed not to seek direct board representation at the time as the board had promised to hold management to account and address the hedge fund’s concerns.

“Unfortunately, execution has fallen well short of expectations, with last year’s annual billings growth below 10% for the first time in the company’s public history, continued negative GAAP earnings, and a share price that is still below where it closed after its first day of trading following its IPO more than six years ago,” the letter, signed by Starboard Managing Member Peter Feld, said.

Feld went on to say that Starboard believes at least one of the recent financings, a $500 million convertible security purchased by KKR to allow Box to pay for share repurchases, appeared to be a “shameless and utterly transparent attempt ‘to buy the vote’ and shows complete disregard for proper corporate governance and financial discipline.”

Box said in a reaction to Starboard’s letter that it does not “believe additional changes to the board are warranted or in the best interests of all stockholders,” although it added it remains open to further discussions with Starboard.

In a lengthy response, Box defended the KKR investment, saying it was the culmination of a Starboard-backed strategic review that allows investors to exit or “participate in any upside potential with KKR as a committed partner.” The company also defended its corporate governance, noting it has added six new directors since 2018, including three following an agreement with Starboard in 2020.

In addition, the company lauded its financial results, saying it is well-positioned to achieve revenue growth of 12%-16% and operating margins of up to 27% by 2024. “It is clear that Box’s strategy is working,” the company said.

Starboard has at least another backer among the shareholder base. A large top 10 shareholder told Activist Insight Online in mid-March that that CEO Aaron Levie had a credibility gap and a sale might be the best path.

It is not clear how many board seats Starboard will seek but it often pursues a majority when attempts to instill change via a smaller number of director changes fails.

Although Starboard believes private negotiations to be at an impasse, it said it remains “open-minded” about a settlement.

Shares in Box were down 0.7% about an hour into Monday’s trading but are up nearly 39% over the last 12 months.

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