Stock climb in Twilio due to investor enthusiasm today
In a significant development for the communications software company Twilio, analysts suggest that more activist investors could emerge as the supervoting-shares class comes to an end, potentially leading to calls for a breakup of Twilio into a communications platform-as-a-service business and a software business.
This shift in control away from founders towards regular shareholders increases the likelihood that activist investors could seek influence to push for operational or strategic changes. The end of Twilio's supervoting status, set to occur next month, will reduce CEO Jeff Lawson's voting stake from 21.8% to 3.7%.
Twilio's financial struggles, including slower growth and valuation pressures, have been evident in the company's stock, which is down close to 90% from its 2021 peak. The company announced in February that it would lay off 17% of its employees and close some of its offices to cut costs and improve profitability.
These challenges have not gone unnoticed, with The Information reporting that activist investor Legion Partners is pushing for changes in Twilio's board. Legion Partners has met with Twilio's board of directors and management, and is calling for changes to Twilio's board and potential divestitures to improve profitability and stock price.
Given Twilio’s financial challenges, activist investors focused on unlocking value through cost cuts, asset sales, or strategic pivots may be attracted. Large asset managers and institutional shareholders with significant stakes, like BlackRock, which holds a notable portion of shares in related contexts, could either act directly or partner with activist firms to influence Twilio’s direction.
Activist investors similar to Findell Capital in other sectors (such as at Oportun Financial) demonstrate how investors push for board changes and management accountability amid financial stress. Comparable hedge funds or private equity firms with activist histories (e.g., Elliott Management, Starboard Value, or even funds related to Peter Thiel’s orbit such as Founders Fund or Valar Ventures as general players in tech) could emerge as Twilio activists or influence shareholders indirectly.
As a result of the report, Twilio's shares were moving higher today, with the stock up 8.7% as of 1:48 p.m. ET. The potential additional activist investors for Twilio, as it transitions away from founder control and addresses its financial struggles, could likely include these established activist hedge funds, large institutional shareholders, or new funds with a mandate for tech sector value unlocking. Public filings over the coming months and proxy contest activity would clarify the specific players in this evolving situation.
Activist investors, attracted by Twilio's financial struggles, may seek to exert influence through cost cuts, asset sales, or strategic pivots, with established hedge funds like Elliott Management, Starboard Value, or even tech-focused funds such as Founders Fund or Valar Ventures being potential contenders. The transition of Twilio away from founder control might also see the involvement of large institutional shareholders, such as BlackRock, or new funds with a focus on tech sector value unlocking.
