LivePerson (NASDAQ:LPSN) was cut to Sell from Hold with a price target of $3 per share by Loop Capital analysts in a note to clients Monday.
The analysts stated that activist investor Starboard's letter criticizing LPSN's board is a distraction at a critical time for the company.
In the letter last week, Starboard said: "The incumbent majority of the Board of Directors (the "Board") of LivePerson continues to sit idly while both the performance and value of the company deteriorate rapidly."
"Despite our best efforts over the past two years to effectuate real change, the Board remains inexplicably and steadfastly committed to Founder, Chair, and CEO Robert LoCascio, who has destroyed immense value and missed commitments for years."
The analysts explained in their note that they are downgrading LPSN "based on expectations that 1) the recent Starboard matter is likely to drag out for several months, becoming increasingly negative to sentiment and an overhang on the stock, 2) issues raised in Starboard's letter are likely to become a major distraction to employees, management, and the Board at a critical juncture in the company's turnaround cycle, and 3) the company will likely report a couple of 'noisy' quarters, which could potentially increase volatility and dislocations in the stock."
While LPSN shares rallied following the Starboard letter advocating for a leadership change, the Loop analysts said the firm "expects Fridays' gains to be ephemeral, and we would sell into the strength."
LivePerson is down 8.9% Monday, at around $4.19 per share.