Due to pressure from an activist investor, programmable communication tools provider Twilio (NYSE:TWLO) saw its shares pop higher on Tuesday. Building a stake in TWLO stock, Anson Funds sent a letter to the company’s board, urging the sale of the enterprise or, at minimum, the divestiture of its data and applications units.
According to a CNBC report, Anson did not hold any exposure to TWLO stock for the period ended Sept. 30. Since then, however, the activist firm acquired a stake of around $50 million, according to a person familiar with the matter who spoke anonymously. Further, the growth of the stake coincided with Anson’s hiring of Sagar Gupta from Legion Partners.
That’s a significant detail. According to The Information, Gupta spearheaded tech investing ventures at Legion, where the market expert pushed for change at Twilio. When Gupta left, Twilio CEO Jeff Lawson had little time to celebrate as the net result remains the same: more pressure to make arguably necessary (and dramatic) decisions for TWLO stock.
Further, as The Information pointed out, Twilio faces a two-front battle. While Gupta may have exited Legion, the activist hedge fund still holds its stake in the company. It continues to pressure the communications specialist, thus exacerbating headaches.
Frustrations Mount for TWLO Stock
On the surface level, TWLO stock might seem a decent investment. Since the beginning of the year, shares moved up roughly 30%. That’s much better than the benchmark index’s performance of around 19% up. However, compared to the Nasdaq Composite, which gained over 37% during the same period, Twilio represents a laggard.
Even worse, TWLO stock falls conspicuously behind the sector benchmark iShares Expanded Tech-Software Sector ETF (BATS:IGV). Since the January opener, IGV swung up more than 49%. On top of it all, longtime stakeholders are likely unimpressed with the recent print. Back in February 2021, TWLO commanded a weekly average price of well over $400.
Moreover, it’s not the only time activists have clamored for something different to materialize at Twilio. Per Barron’s, in early June of this year, Legion demanded that the tech firm change its board and consider divestitures. At the time, Lawson owned supervoting stock, giving him approximately 22% of voting power while only owning 3.7% of the equity.
However, Twilio’s use of supervoting shares was set to expire by the end of June. With pressure intensifying, it wouldn’t be out of the question for the tech specialist to at least consider a divestiture. While Covid-19 impacted wheeling and dealing in the tech ecosystem, several major blue chips secured acquisition agreements.
Why It Matters
From TipRanks, TWLO stock carries a moderate buy consensus view among analysts. This assessment breaks down as eight buys, 11 holds and two sells. However, the average price target sits at $69.35, implying less than 7% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
