Finance

Activist investor Elliott Management takes big stake in Salesforce after software giant sheds workers, real estate

Activist investor Elliott Management takes big stake in Salesforce after software giant sheds workers, real estate

Hedge fund Elliott Investment Management has taken a substantial activist stake in Salesforce Inc., making its move after layoffs and a deep stock swoon at the enterprise software giant.

Elliott, which often pushes for strategic changes and seeks board representation, took a multibillion-dollar stake in the company, according to a person familiar with the matter. The San Francisco company’s market capitalization is now $151 billion, down from a peak of more than $300 billion in 2021.

“Salesforce is one of the preeminent software companies in the world, and having followed the company for nearly two decades, we have developed a deep respect for Marc Benioff and what he has built,” said Jesse Cohn, managing partner at Elliott in a statement. “We look forward to working constructively with Salesforce to realize the value befitting a company of its stature.” 

Benioff is chairman and co-chief executive officer of Salesforce. Elliott didn’t disclose details of its investment, which was first reported by The Wall Street Journal, in the statement.

Paul Singer’s Elliott Raked In a Record $13 Billion Last Year

Elliott, which has been involved in pushing for changes at tech companies ranging from Paypal Holdings Inc., Pinterest Inc. to Western Digital Corp., is the second prominent activist investor in recent months to get into the stock. In October, Starboard Value took a stake in company and said the company had issues translating growth into profitability.

Salesforce said earlier this month it would cut about 10% of its workforce and reduce its real estate holdings, after hiring too many people during the Covid pandemic as demand surged. The company, which had about 80,000 people at the time, said it was adjusting to more cautious spending by customers. 

Salesforce had almost tripled its workforce in the previous four years, in large part through dozens of acquisitions, including buying Slack in 2021 for $27.7 billion. From January 2020 to the end of October last year, headcount grew by more than 30,000. 

“This is not surprising to us,” said Bloomberg Intelligence analyst Anurag Rana of Elliott’s move. “Salesforce’s valuation has plummeted since it announced the acquisition of Slack and since then we have seen a slowdown in sales and multiple executive departures.”

Bret Taylor, who had been Salesforce’s co-CEO, said last year that he would leave the company to return to entrepreneurial activities. Taylor had been seen as the obvious choice if Benioff ever stepped aside at Salesforce.

“It is now trading well below its pre-pandemic levels,” Rana added. “Elliott’s involvement could help management focus both on organic sales growth and margin expansion. We won’t be surprised if there is a change at the top also, similar to what Microsoft went through back in 2013.”

–With assistance from Tom Giles.

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Published at Mon, 23 Jan 2023 01:43:39 +0000

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