Hedge fund Elliott Investment Management has taken a substantial activist stake in Salesforce Inc., swooping in after layoffs and a deep stock swoon at the enterprise software giant.
“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, referring to the company’s co-chief executive officer and chairman. “We look forward to working constructively with Salesforce to realize the value befitting a company of its stature.”
Elliott’s holding is a multibillion-dollar stake, according to a person familiar with the matter who asked not to be identified because the details are private. San Francisco-based Salesforce had a market capitalization of $151 billion at close on Jan. 20. That’s down from a peak of more than $300 billion in 2021. Salesforce shares rose about 4.2% in pre-market trading Jan. 23 in New York.
The move by Paul Singer’s Elliott — which often pushes for strategic changes and seeks board representation — adds to activist pressure on Salesforce to boost profits and shareholder returns after a half-decade of fast hiring and large acquisitions, including the purchase of Slack in 2021 for $27.7 billion. Salesforce said this month it’s reducing its real estate footprint and cutting 10% of a workforce that has almost tripled in the past four years.
Benioff said earlier this month that customers are taking a “more measured approach to their purchasing decisions,” and noted that the economic “environment remains challenging.”
Salesforce revenue in the third quarter rose 14% from a year earlier to $7.84 billion. That was a sharp slowdown from the pace of growth a year earlier. Analysts expect only a 9% increase in sales in the fourth quarter.
Timing of Elliott Salesforce stake
Elliott’s stake in Salesforce comes when activism as a whole is roaring back into some sectors globally. The 177 activist campaigns announced worldwide last quarter were the most since 2018, Bloomberg data show. Salesforce joins Walt Disney Co. and Bayer AG among the most high-profile corporations that activists target. Elliott’s statement didn’t disclose details of its investment, which was first reported by The Wall Street Journal. Salesforce declined to comment.
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 the company and said it had issues translating growth into profitability.
“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.”
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