Third Point LLC, led by Dan Loeb, is reportedly the latest activist investor taking a stake in Salesforce.
The company’s profits have fallen and layoffs loom after it admitted hiring too many employees amid a 2021 revenue rebound.
Salesforce’s stock plunged last year but rebounded in January; Morgan Stanley thinks it may keep rising.
Salesforce (CRM) shares rose as much as 3.4% Thursday after activist shareholder Third Point LLC reportedly took a stake in the embattled business software giant.
Dan Loeb’s Third Point LLC is at least the fifth activist firm to make a significant investment in the company recently, joining Elliott Investment Management, Starboard Value, ValueAct Capital Partners, and Inclusive Capital. The size of Third Point’s investment and its intentions could not be confirmed.
Shares of Salesforce plunged 48% last year, mirroring investors’ broader distaste for technology stocks but also reflecting the company’s financial challenges and concerns about its leadership.
Salesforce in November reported its fiscal 2023 third-quarter profit fell 55% from the same period the prior year, with rising expenses outpacing a 14% revenue increase.
In January, the company announced plans to cut 10% of its workforce, totaling about 8,000 jobs, and reduce office space in a large restructuring—the company’s first in its 23 years of existence—that could cost as much as $2 billion. The company will announce its full-year earnings results March 1.
The company’s financial woes have coincided with disarray in its executive leadership. Co-CEO Bret Taylor left the company at the end of January after sharing the role with co-founder Marc Benioff since late 2021.
Taylor helped guide the company’s $27 billion acquisition of Slack Technologies, the largest transaction ever for a firm that seemingly specializes in them. Salesforce has made 72 acquisitions in the past 16 years, and critics now question that buying spree.
Stewart Butterfield, Slack’s former CEO who joined Salesforce upon completion of that deal, also recently left the company.
In a letter to employees announcing January’s layoffs, Benioff conceded the firm hired too many employees as sales rebounded dramatically in the wake of pandemic shutdowns.
That explanation apparently didn’t satisfy the company’s workforce. About 500 Salesforce employees reportedly sent a letter to the company’s leadership, demanding answers about the layoffs.
Defying Concerns, Stock Rebounds
Meanwhile, Salesforce’s shares have rebounded considerably since the start of the year, gaining 31% after rising as high as $175.37 per share Thursday. That’s still 44% less than the stock’s all-time high of $311.75 reached 15 months ago.
Morgan Stanley analysts, in a recent research report, said they think the stock’s rebound could continue. They raised their price target on the company’s shares to $236, up from $228.
Despite the company’s current turmoil, Morgan Stanley praised management’s recent shift from growth objectives to profitability.
Moreover, stakes from activist firms “with proven records of helping (or pushing) software companies to better realize inherent value, may help to bolster confidence Salesforce should continue to head in the right direction,” the firm’s report stated.