‘No One Is Immune: Activist Investors Target Tech Companies After Stocks Dive

In 2022, tech companies that slumped in stocks in 2022 are poised for another downturn, attracting the attention of activist investors who are pushing for changes that will make them richer and cheaper to get on board.

In particular, many billionaire investors are recovering from layoffs and seeing how big investors see falling stock prices and slowing growth. Investors are preparing to step in, take drastic action to boost stock prices, and then sell for a profit.

According to the CEO of a tech company that recently switched assets, “no one is immune. We look more at the market dynamics.”

According to Nasdaq IR Intelligence's 2022 Shareholder Activism Report, citing FactSet data, last year was a stellar year for US shareholder activism, with nearly 900 campaigns taking place in an uncertain macroeconomic and geopolitical environment.

Big tech companies are attracting investors because "it's an incredibly good business, but they can be more profitable," said the CEO, who spoke on condition of anonymity. Activists said they see an opportunity to increase profits and profits and leverage investment in these companies.

As stocks fell, investor activity increased. David Larcker, a corporate governance expert at Stanford University, calls this corporate activity "regular play."

"When prices are falling, it's a natural place to look for value and change strategy," he said. But the goals were less [or] average. We are now in a different world that caters to big companies and creates the opportunity to get more board seats.

"Not all activist investors are created equal."

Sales Force Inc. The company added three new members to its board last week after ousting Brett Taylor, whose shares have fallen 22% over the past 12 months. One of them, the hedge fund ValueAct Capital, Adobe Inc. According to Robert Bartlett, a law professor at the university, this also had a major impact on Microsoft Corporation's shift in strategy. From legacy software approaches to cloud platforms. From California, Berkeley.

On Wednesday, a fifth activist investor bought shares in Salesforce. As reported by the Wall Street Journal, Third Point LLC has acquired a stake in the software company.

Read more : Salesforce appoints three CEOs under pressure from activist investors

Salesforce is also under pressure from hedge fund Elliott Investment Management, which is expected to name a list of executives fired as a result of the downturn and 1,900 layoffs. Elliott has said in recent years that he held multi-billion dollar positions in Salesforce and Pinterest Inc. PayPal Holdings Inc., and also bought stakes in AT&T Inc. and Twitter Inc. before he was joined by Tesla Inc. CEO Elon Musk was bought.

Elliott presents a more adversarial challenge than ValueAct due to its combative nature and demands.

"Not all activist investors are created equal: some, like Valuect, are smarter than others," Bartlett said.

In October, Starboard Value CEO Jeff Smith announced that the hedge fund had acquired an undisclosed stake in Salesforce and said the software company has had no significant impact on shareholders in recent years.

ValueAct, Elliott Management and Starboard Value all declined to comment on MarketWatch.

The Walt Disney Co., whose shares have fallen 23% over the past 12 months, faces a tough opponent cutting costs and battling stiff streaming competition.

Read more : Activist Investor Targets Disney Board Member in Open Letter to Shareholders

Though Disney isn't a tech giant, Netflix Inc. has started streaming in recent years. and Apple Inc. Contrary to popular belief, the road has not been easy: CEO Robert Iger handed over the reins to a hand-picked successor in less than three years. Bob Chapp, the board asked him to come back and Chapp refused.

"Disney's succession plan has failed and a new voice is needed on the board," a Trian spokesman told MarketWatch as Nelson Peltz, co-founder of Trian Fund Management, attempted to join the Disney board. Pelz wants Disney board member Michael Fromm, vice chairman of MasterCard Inc.

In response, Disney's board of directors said Frohman is "a respected director with extensive experience in global affairs and international affairs, and the board believes he is better suited to advance values." Actions that Mr. Peltz or his son Matthew Peltz Frohmans could be a replacement."

Trian's Restore the Magic website lays out the main criticisms: Disney stock is trading at an eight-year low, and the company is suffering from adjusted earnings per share, free cash flow, and... a sharp drop in shares. Meanwhile, Disney released an updated version of its manager that puts more "decisions in the hands of the creative team," overhauling management and prioritizing streaming profitability.

Hedge fund billionaire Christopher Hohn, owner of Google, Alphabet Inc. The company's 12,000 layoffs announced in late January weren't enough to reduce the tech giant's cost base, prompting the parent company to shed at least 20% of its workforce.

Coon, the founder of activist children's investment fund management, which owns Alphabet's $6 trillion, wrote to Alphabet CEO Sundar Pichai in late January that he was concerned about the job cuts announced last week.

Hong could not be reached for comment.

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Strong growth during the pandemic has not only boosted tech company revenues and workforces, but also raised expectations. George Deglin, CEO of mobile messaging startup OneSignal, told MarketWatch that the market demands it. "There was a lot of pressure to grow."

In fact, some of the same hedge funds that are now calling for layoffs called for more hiring during the pandemic-induced sales boom, Deglin said. "Given the growth in sales and headcount at these companies over the past several years, the current strike is not surprising," he said.

"Investors say [technology companies] have exploded in growth," but they're being hired "without regard to profit or cost," said Bartlett, a Berkeley law professor. "Now reality is catching up with us and we need to focus on margin and be efficient and profitable."

So what other companies might be vulnerable? Intel company. or HP Inc. Will the tech titans be next?

Industry watchers won't guess, but Meta Platforms Inc. Facebook seems a logical candidate for parent company as ad spending slacks as it tries to contain development costs and shed more than 11,000 jobs.

But targeting the meta is easier said than done: CEO Mark Zuckerberg owns 55% of the company's voting shares, giving him a lot of power. Some tech leaders have instituted founder controls at their companies to protect executives from activist investors demanding change. snap inc

But Jim Breyer, an early Facebook investor and former board member, says Meta isn't cutting costs fast enough, even though it accounts for three-quarters of its revenue. And in a letter to Meta in October, Brad Gerstner, CEO of investor Altimeter Capital, said Meta needs to rebuild its mojo by cutting labor costs by 20%, adding that expensive investments in the company's $5 trillion in Metaverse technology would exceed US dollars. each year

"Meta needs to restore the confidence of investors, employees and the tech community to attract, motivate and retain the best people in the world," Gerstner wrote in the letter. "In short, Meta needs to be fit and focused."

Zuckerberg acknowledged the importance of efficiency -- he used the word 28 times in a conference call with analysts following Meta's earnings report last Wednesday -- and bemoaned the need to cut costs after 18 years of accelerated growth.

Katya Romanovskaya, co-founder of app maker House of Peach, said: "Active investor activity goes hand in hand with general dissatisfaction with the economic downturn." "It's hard to say whether it's good or bad, depending on the situation. What motivates some activists in their campaigns and what are their real motivations?

"Sometimes it's almost impossible to tell if activists are highlighting or creating a problem," he added.

Focus on PayPal's struggle with activist investor Elliott Management