By Dean Seal

Activist investor Elliott Investment Management has taken a $2.5 billion stake in Texas Instruments and is pushing the chip maker to improve its free cash flow generation.

The firm sent a letter to Texas Instruments' board on Tuesday disclosing the significant stake and criticizing the underperformance of the company's stock relative to its peers.

Elliott said that ever since Texas Instruments launched a substantial ramp-up in capacity in 2022, its free cash flow has declined by more than 75%, and shareholders have been given limited visibility or guidance on when free cash flow per share will return to its historical norm.

The company is also building capacity far in excess of expected demand, the firm said. Texas Instruments has targeted revenue capacity of $30 billion in 2026, which represents 50% excess capacity above the current consensus revenue expectations, Elliott said.

The investment firm is calling on Texas Instruments to adopt a dynamic capacity-management strategy and set a per-share free cash flow target of at least $9 for 2026, which would be 40% higher than current investor expectations.

Texas Instruments shares touched an all-time high of $206 in early trading on Tuesday.

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(END) Dow Jones Newswires

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