Shareholders of cloud storage company Box (NYSE:BOX) should be getting used to surprises by now. Yesterday, activist hedge fund Starboard Value LP issued an open letter to management, citing concerns over the company’s $500 million convertible preferred equity financing. This move follows Starboard’s proxy battle earlier this month to take greater control of the company. Activist battles like this one are nothing new. But, if Starboard succeeds and gains majority control of BOX’s board, the hedge fund has the potential to dramatically change the trajectory of the company — and BOX stock.

Oh, and that includes the ability to force its immediate sale.

While no one knows how the drama will play out, one thing is certain. Starboard has a track record of big returns in tech. With BOX shares still trading at a reasonable valuation, a slight premium to its closest competitor Dropbox (NASDAQ:DBX), now’s the time to place a bet on the stock.

Activist Investing 101: The Art of Influence and Winning Friends

Activist investors have a very simple operating strategy: Find an underperforming company, accumulate shares and then extract value by brute force. Activists have changed the composition of countless company boards through proxy contests. They’re also responsible for spin-offs and divestitures of underperforming assets. And they’re responsible for big stock returns.

Activist investing took a brief pause at the start of the coronavirus pandemic, with firms spending most of last year shoring up capital. Now, with the economy improving, activity has picked up. Already, Starboard is pursuing proxy battles against five U.S. companies, including Commvault Systems (NASDAQ:CVLT), Ebay (NASDAQ:EBAY), GCP Applied Technologies (NYSE:GCP), Mednax (NYSE:MED) and Merit Medical Systems (NASDAQ:MMSI).

Starboard has a history of making big sweeping changes — starting by gaining influence on company boards. The New York-based hedge fund is looking for roughly two dozen board seats in total, according to the company’s latest filings. Starboard rose to fame around 2014 for its turnaround of restaurant chain Olive Garden, owned by Darden Restaurants (NYSE:DRI). The firm started by making tweaks to the company’s generous policy of giving customers unlimited breadsticks, along with other menu changes.

Ultimately, Starboard’s influence resulted in a shareholder vote to remove all 12 Darden directors and install Starboard’s slate, a rare feat for a hedge fund at a major U.S. company.

The Battle at BOX

Now, Starboard wants to shake things up at BOX. The firm, which owns just under 8% of BOX outstanding shares, initially built a friendly stake in September 2019. The two appeared to have reached a standstill agreement last year that allowed Starboard to add three board members and form an operating committee.

But the relationship has since soured. Earlier this month, Starboard issued an open letter to Box management, rebuking the company for underperformance. Starboard’s letter cited increasing frustration with “continued poor results, questionable capital allocation decisions, and subpar shareholder returns.” As a result, the company nominated four members to Box’s board.

As you’d expect, BOX management didn’t appreciate the criticism. The company stated in a press release that it rejects this attempt by Starboard to take over additional seats. Box highlighted that it has already overhauled its board, having replaced three-long-standing directors with three new independent directors to its board under an agreement with Starboard in March 2020.

BOX Stock: Slowing Growth

So what’s Starboard so upset about? For starters, growth at BOX is slowing. In fact, the company’s growth rate has been in steady decline for years. For reference, in its most recently reported quarter, BOX grew just 8% on a year-over-year basis, down from 14% in F2020. The company has struggled to compete with Microsoft (NASDAQ:MSFT), which has aggressively expanded into the cloud-based collaboration space with its Teams product.

BOX’s business challenges have been an albatross for the stock, which has woefully lagged the market and other work-from-home tech peers. Zoom (NASDAQ:ZM) stock, for example, gained over 400% in 2020. Box gained just 8%, underperforming even the S&P 500, which rose 16%.

But there’s another reason Starboard is upset. BOX had reportedly been exploring a sale of the company to potential buyers, including private equity firms. But last month, the company backtracked, announcing a $500 million investment from KKR & Co. (NYSE:KKR).

The transaction is scheduled to close following BOX’s Q1 earnings results on May 27. BOX says it will use the proceeds to buy back stock and bring value to shareholders. This would presumably involve buying out Starboard.

What’s Next for BOX?

For BOX, KKR’s investment is a lifeline in its battle with Starboard and sends a clear signal that management has no interest in selling the company.

But Starboard won’t take no for an answer. The firm, which is clearly pushing for an outright sale of the company, says the offering “has no bona fide business purpose” and was done solely to entrench the Board and “buy the vote” ahead of elections.

So, what’s the next catalyst for BOX stock? The Board vote, which will take place at the company’s shareholder meeting, likely in late June or early July.

The vote is clearly a binary event. But either outcome looks good for BOX stock. First, if Starboard has its way and wins a majority of board seats, it’s likely to remove BOX CEO Aaron Levie and/or actively explore a sale of the company.

But even if Starboard fails to win more board seats, things could still get better at BOX. With KKR’s investment, BOX will likely take additional steps to bulk up its product offering. In particular, the company could expand on its February acquisition of e-signature provider SignRequest.

With the board vote an important binary event, now’s the time to buy BOX stock. BOX shares trade at 17x EBITDA, a slight premium to its closest competitor Dropbox, at 14x. The shares have been on a steady uptrend. BOX is now up 33% year-to-date, versus a 14.6% decline for Zoom and an 18% gain for Dropbox. Even with the recent run in the stock, the risk-to-reward looks reasonable here.

On the date of publication, Joanna Makris did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joanna Makris is a Market Analyst at InvestorPlace.com. A strategic thinker and fundamental public equity investor, Joanna leverages over 20 years of experience on Wall Street covering various segments of the Technology, Media, and Telecom sectors at several global investment banks, including Mizuho Securities and Canaccord Genuity.