Shares of London Stock Exchange Group Plc sparked on Wednesday following a report that activist hedge fund Elliott Management has built a "significant" stake in the company.
According to the Financial Times, citing people familiar with the matter, Elliott has been engaging with LSEG to help engineer an improvement in the group's performance.
Last week, LSEG shares were caught up in a broader selloff of data and software companies amid concerns about the impact of new AI tools.
The FT said the exact size of the stake could not be ascertained and that Elliott and LSEG declined to comment.
Ahead of the release of its annual results later this month, Elliott has encouraged the company to consider launching a multibillion-pound share buyback once a £1bn tranche is completed and to focus on closing the gap on margins compared with rivals, according to FT sources.
Elliott has previously pushed for companies to simplify their corporate structure to boost performance. However, FT sources said Elliott does not want LSEG to consider a full sale or a spin-off of its stock exchange business.
At 0950 GMT, LSEG shares were up 2.8% at 7,578p, having risen to as high as 7,988p earlier.
The shares tumbled last week as LSEG got caught up in a broader selloff of software firms amid concerns about AI disruption, after US AI firm Anthropic released an AI-powered productivity tool for companies' in-house legal teams.
Dan Coatsworth, head of markets at AJ Bell, said: "A near-40% collapse in London Stock Exchange Group's share price in the past 12 months has put the company on the radar of activist investors. Elliott Management has reportedly taken a stake in the business, news of which triggered a bounce in the exchange operator's share price.
"Activists take stakes in a business so they can flex their muscles and demand an audience from management. Their typical approach is to push for change, whether that is new leadership, asset sales, or a reallocation of capital. The activist's purpose is to buy cheap, drive up the share price and then get out for a profit. Sometimes campaigns can be sewn up in under a year, others take much longer.
"LSEG is among the multitude of names seen as being at risk of being disrupted by AI, which is important because it has repositioned itself as a data company in recent years. It is also having to contend with lacklustre exchange operations where the flow of IPOs to replace those delisting through takeovers remains weak.
"LSEG's Refinitiv platform has a wealth of information about stocks, funds and bonds, enabling users to drill down into financial accounts and historical share price information, as well as see the latest trading activity, news feeds, and much more. Theoretically, AI could pull together some of this data by analysing company reports and news sources, but it is highly unlikely to be able to offer the richness of Refinitiv's system.
"Some activist campaigns are simple to understand. For example, Elliott wants BP to cut costs, improve cash flow, and focus on the core oil and gas business. Quite how it plans to whip LSEG into shape is less obvious. Reports suggest Elliott doesn't want to break up the business or put it up for sale. That means the market will be watching closely for Elliott to spell out how it plans to refocus LSEG and make money along the way."