Investing

Hedge fund activist Paul Singer just found his next target

Key Points
  • Activist hedge fund Elliott Management has reported a more than 15 percent stake in Gigamon, according to a Monday filing with the SEC.
  • Gigamon is a small-cap company that makes software to manage traffic online.
  • Elliott Management is run by billionaire investor Paul Singer.
Paul Singer
David A. Grogan | CNBC

Activist hedge fund Elliott Management has purchased a 15.3 percent stake in Gigamon, which makes software to manage traffic online, according to a 13-D filing Monday with the Securities and Exchange Commission.

Shares of Gigamon rose more than 16 percent Monday after the move was disclosed.

Elliott is run by billionaire investor Paul Singer, who just last week raised more than $5 billion in 24 hours.

The firm said in the SEC filing that shares of Gigamon are "significantly undervalued and represent an attractive investment opportunity."

Further, Elliott seeks to engage in a dialogue with Gigamon's board to discuss opportunities that would maximize shareholder value, the filing said. This could entail Elliott making proposals with respect to potential changes in Gigamon's operations or management, the SEC filing said.

Gigamon also got a boost after Dave Thomas of Atalan Capital Partners recommended the stock at the Sohn hedge fund conference in New York on Monday, citing the company's high customer retention rates and a potential for 40 to 50 percent upside.

Last week, Elliott's Singer announced his latest $5 billion offering in a note to investors, saying that the funds would be used toward the "possibly large opportunity set that could emerge when investor confidence is impaired, recent correlations and assumptions don't work, and prices are changing rapidly."

With Monday's gains, shares of Gigamon have risen about 38 percent over the past 12 months but are down close to 11 percent for the year-to-date period.

GIMO 12-month performance

Source: FactSet

— Reuters contributed to this report.