Activist hedge funds’ stake in Salesforce
Earlier in this series, we discussed factors that will work in Salesforce’s (CRM) favor in 2017. It is seeking to double its revenue to $20 billion by 2021–2022.
According to Bloomberg, hedge fund and activist investors, namely Corvex Management, Jana Partners, and Sachem Head Capital, had taken a stake in Salesforce as of December 31, 2016. They bought 3.5 million, 3.2 million, and 2.1 million shares, respectively. Previously, Jana Partners urged Qualcomm (QCOM) to separate its chip and licensing business. However, Qualcomm stated that it doesn’t intend to split the company.
Activist investors’ strategies to maximize returns
In late 2016, Elliott Management, headed by Paul Singer, disclosed that it now owns a ~4% stake in Cognizant (CTSH), with an investment value close to approximately $1.4 billion. With this stake, it has become one of Cognizant’s top four shareholders.
It was Elliott Management that influenced Symantec (SYMC) to consider a strategic acquisition of LifeLock to boost its Consumer Security segment. It resulted in a buyout. Elliott Management also spurred the sale of Blue Coat Systems to Symantec, thereby strengthening and expanding the latter’s Enterprise Security segment. Elliott Management had a considerable influence on the Dell-EMC (EMC) deal as well, which is the biggest acquisition to date in the technology space.
Activist investors’ strategies usually revolve around taking a stake in a company and then devising ways to maximize shareholder returns. They usually exert considerable pressure on companies either to change their capital structure or strategy, to spin off, or sell to a PE (private equity) firm.
In the past, we’ve seen that shareholder activism has played a dominant role in the breakup of companies to unlock shareholder potential. Technology companies such as eBay (EBAY), Hewlett-Packard (HPQ), and Symantec (SYMC) all finally succumbed to pressure and announced their splits.