Activist investor Engine Capital pushes for new board at Upwork after taking 4% stake

Activist investor Engine Capital has a roughly 4% stake in freelance marketplace Upwork and is pushing for a shakeup to the company's board.

In a letter to Upwork's board on Friday, Engine said the company needs to fix "foundational issues" that are plaguing the platform. Upwork shares rose about 8% on the news.

Engine stopped short of calling for CEO Hayden Brown's ouster in the letter, which was obtained by CNBC, but questioned whether Upwork's board has been adequately overseeing management.

"Brown is now effectively on her third management team in four years," Engine founder Arnaud Ajdler said in the letter. Brown has had three CFOs in four years, the activist said, adding that former employees have expressed frustration with the company's "lack of strategic clarity and focus."

Engine singled out several Upwork directors, including Chairman Thomas Layton and Greg Gretsch, for their lengthy tenures. Splunk general manager Gary Steele is also on the board.

"We also note the numerous business relationships between various directors, which diminish their independence," Ajdler wrote. Meanwhile, none of Upwork's directors have any apparent experience in staffing industry, the activist said.

Engine said Upwork has underperformed its closest peer Fiverr and should move quickly to simplify the company's platform, cut costs, and grow its enterprise business.

A representative for Upwork didn't immediately return a request for comment.

Upwork shares are down 37% this year and about 85% from their 2021 high. The company's stock soared during the back half of 2020 and into the following year, as remote work during the pandemic spurred growth in the freelancing market.

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