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Is Starbucks Management too Good for Norman Peltz?

Perhaps counterintuitively, Nelson Peltz's decision to sell his stake in Starbucks could be seen as a vote of confidence in the struggling coffee chain's management.

starbucksInvestors seem to think so â€" they've sent Starbucks' shares way up as of midday Thursday.

Peltz, through his Trian Fund Management, is an "activist investor" with a particular interest in troubled food companies. Trian has sizable stakes in Wendy's International, HJ Heinz, and PF Chang's China Bistro, among others.

His stake in Starbuck's was relatively tiny â€" just short of 900,000 shares, or less than 1 percent of the company.

Crucially, he bought the shares at an unusual time for him â€" after Starbuck's founder Howard Schultz had returned as CEO to affect a turnaround at the already-teetering company.

It could be that, at the time, Peltz was less than confident in Schultz' seriousness. Peltz normally invests in companies that he sees as undervalued and whose management is stodgy and resistant to change. He then agitates until he either has some power in the form of board seats, top executives start taking his "advice" seriously, or they leave.

Schultz was just six months into his return at the time of Peltz' investment last May. He had already made some big moves, such as cutting back on store openings and reducing the number of menu items. It's possible that Peltz thought this wasn't nearly enough, and was thinking about taking a bigger share.

Since then, though, as sales have continued in their free-fall, Schultz has made even more radical moves, including the planned closure of about 600 stores.

Peltz' investment wasn't nearly big enough for him to take on an "activist" position. If Schultz is already doing what Peltz would likely have agitated for, Peltz probably sees no point in buying up more stock. With such big changes under way, Starbucks is outside the Peltz bailiwick: The activist investor has no use for the activist CEO.

Here's an illustration of the odd things that happen when an activist investor comes on the scene: On the day Peltz bought his shares, Starbucks' stock jumped 6.1 percent. On the day he sold them, it jumped nearly 5 percent.

As it is, Peltz came out about even on his investment â€" the stock is right about where it was when he bought his shares.

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