The Twilio Inc (NYSE: TWLO) share price rallied 5.19% higher despite the activist investor Legion Partners persuading the cloud computing firm to change its board members and consider spinning off some of its assets.
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According to an exclusive report by the Information, the activist investor has held over six meetings with Twilio in the past few months and has discussed topics such as improving the balance sheet and strategic alternatives, cost and capital structure.
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When reached for comment by Reuters, a spokesperson for Legion Partners confirmed that the two firms had held discussions and that the hedge fund was hopeful that Twilio would take “significant action” on its proposals.
Legion is a well-known hedge fund that has previously influenced the appointment of its chosen directors to the management boards of companies such as Kohls and Bed Bath & Beyond. The hedge fund owns $40 million worth of Twilio stock as of March 31, 2023.
The hedge fund has a unique opportunity in that Chief Executive Officer Jeff Lawson’s supervoting shares gives him control of nearly 22% of the company’s outstanding shares. Still, they are about to expire, allowing the fund to vote for some of its recommendations.
However, given that Twilio’s market capitalisation is over $11.53 billion, the hedge fund would need the support of other significant shareholders to pass its resolutions in a general meeting of shareholders. Lawson owns 3.6% of the company’s stock as of February 2023.
After the supervoting shares expire, all shares will combine to form one class, which could open the company to more pressure from shareholders since the move will strip Lawosn of his massive voting stake.
Shares in Twilio traded higher after the report as the company declined to comment on the issue when contacted by Reuters. The company has been struggling with lower demand for cloud services and recently issued guidance for Q2 that was lower than Wall Street estimates.
The company has been forced to reduce its workforce and, in February, announced that it would reduce its workforce of over 9,000 people by 17%.
*This is not investment advice.
Twilio share price.
Twilio shares edged 5.19% higher to trade at $65.92, from Tuesday’s closing price of $62.67.
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