Tag: Elliott Management

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Activist investors want to crank up the Twitter revenue machine

When Elliott Management, a New York investment firm with an activist approach, sets its sights on a company, it usually means it has been under-performing, and it sees a ton of unmet potential. News broke on Friday that the company had bought a substantial stake in Twitter and was seeking board seats.

Sources have confirmed this information and say the stake is in the 4-5% range. The company is looking to take three or four board seats and wants to implement big changes, including, as reported, replacing Jack Dorsey as CEO.

Sources say that Dorsey has too many side projects, particularly Square, but also his growing interest in crypto currency and Africa, and that Twitter requires a full-time, focused chief executive. The sources indicated that they aren’t discounting Dorsey completely, and if he were willing to drop his other projects, the firm would entertain the idea of retaining him.

The company is also reportedly concerned about the constant executive turnover in key positions like product manager, and they are hoping to stabilize this. Yet like any Elliott target, this one is undervalued, but has the potential for much greater income than it’s currently generating.

As in the past, you can probably expect at some point that Elliott will share a public letter with shareholders outlining the problems it has observed, and the path, as it sees it, to a more stable and profitable future. The company sent such a letter to eBay last year, which announced plans to execute on that plan shortly thereafter. It is reasonable to assume it will follow a similar pattern with Twitter.

It is hard not to look at this deal in the context of Elliott founder and principal Paul Singer’s politics. He is a big contributor to the Republican Party, but sources say this deal is about money, not politics.

They say that the fund manages a large swath of investors, from pension funds to charitable endowments, with a fiduciary responsibility to those organizations, and considered the idea of introducing politics into an investment decision to be, in the words of one source, “ridiculous.” Voices on the Twitter platform over the weekend didn’t agree, suggesting it’s a political move by Singer.

Regardless, big changes will likely be coming to Twitter, and that could involve the user experience, new products and very likely more advertising, as the new boss looks to unlock the financial potential in the platform.

Twitter stock was up more than 8% on the news as we published this post.

Elliott Management letter puts eBay on notice to improve stock performance, sell StubHub

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Advocating reform, activist investor Elliott Management takes a $2.5B stake in SoftBank

The activist investment firm Elliott Management has steadily amassed a $2.5 billion stake in the headline-grabbing, Japanese technology conglomerate SoftBank even as a series of missteps battered the company’s share price.

Famous for its investments in companies like Slack and Uber and infamous for betting billions on the co-working real estate marketplace and development company, WeWork, SoftBank presented an enticing target for Elliott’s brand of financial speculation, according to an initial report in The Wall Street Journal.

Last November, SoftBank Group reported a $6.5 billion loss thanks in part to its efforts to bail out its investment in WeWork — a company once valued in private markets at $47 billion.

Those losses sent the stock price tumbling, but despite its troubles, SoftBank still holds a vast stable of portfolio companies. It’s those assets that Elliott Management thinks are appealing enough to carve out some of its $34 billion in assets under management for a minority stake.

“Elliott’s substantial investment in SoftBank Group reflects its strong conviction that the market significantly undervalues SoftBank’s portfolio of assets,” a spokesperson for the firm wrote in an email. “Elliott has engaged privately with SoftBank’s leadership and is working constructively on solutions to help SoftBank materially and sustainably reduce its discount to intrinsic value.”

SoftBank made waves in the technology investment world with its massive $100 billion Vision fund, which was designed to take stakes in emerging technology companies that required lots of cash, but could potentially transform various industries.

The audacious investment strategy was financed by working with sovereign wealth funds like the Saudi Arabian Public Investment Fund (whose principals are linked to a leadership known for ordering the assassination of journalists) and companies like Apple and Microsoft.

Through its limited partners and with its own cash, SoftBank was able to take large equity stakes in companies across a range of different industries. However, it now appears that those large equity stakes will be difficult to maintain or justify.

Over the last year, several of SoftBank’s portfolio companies have run into trouble, and it’s an open question whether any changes Elliott might be able to effect at the top of the organization would have an impact on the performance of the underlying portfolio.

As Zume layoffs loom, a look back at SoftBank’s troubled investing year

Indeed, given SoftBank founder Masayoshi Son’s 22% ownership stake in the business, any corporate activism that Elliott may initiate or advocate for could have limited results.

There are good businesses in the SoftBank portfolio, and public investors have rushed in to buy the company’s stock on the back of the disclosure of Elliott Management’s investment.

However, the flood of capital that came into the venture market in 2018 seems to have crested, which could leave SoftBank and its new investors soaked.

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LogMeIn agrees to be acquired by Francisco Partners and Evergreen for $4.3B

LogMeIn announced this morning that it has agreed to be sold for $4.3 billion to affiliates of Francisco Partners and Evergreen Coast Capital Corporation, the private equity affiliate of Elliott Management Corporation. The purchase price comes out to $86.05 per share in an all-cash deal.

The company had a 52-week high of $96.87 per share and a low of $62.02. The purchase price represents a 25% premium on the closing share price on September 18th, which the company reports was the day media reports began to leak that the company was up for sale.

Bill Wagner, president and CEO at LogMeIn said in a statement that the price reflects the high value of the company and will give stockholders a meaningful return. As you would expect, he was also was optimistic that the partnership with Francisco and Evergreen will help the company going forward.

“We believe our partnership with Francisco Partners and Evergreen will help put us in a position to deliver the operational benefits needed to achieve sustained growth over the long term,” Wagner said in a statement.

As for the private equity firms, they are getting a broad portfolio of products including unified communications and collaboration (UCC). LogMeIn bought Jive Communications for $357 million in 2018 to give it deeper penetration in the unified communications market. It’s most well known product is probably GoToMeeting, which has had to compete with the likes of Zoom, WebEx, BlueJean, Google Hangouts and others in a crowded video conferencing space. The company bought GoToMeeting from Citrix in 2016 for $1.8 billion

It has a variety of other products including remote access tools. It raised $30 million in venture funding, according to Crunchbase data, before it went public in 2009.

The deal is expected to close in mid 2020, but the company does have a 45 day go-shop provision, which means it can try to find a buyer, who will offer a better price than this one. If it doesn’t, the deal will be subject to standard regulatory scrutiny before it closes next year.

LogMeIn is buying Jive Communications for up to $357M to step up in enterprise unified comms

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eBay announces plans for new strategic initiatives under pressure from investors

In January, eBay received a strongly worded letter from activist investors Elliott Management, outlining a way forward for the company that Elliott saw as floundering. Two weeks ago, the company announced it was restructuring operations and laying off some of its workers. Today, the company announced further steps toward reorganizing, much of which sounds straight out of Elliott’s letter earlier this year.

In the January letter, among other things, Elliott suggested the company lacked operational discipline and it believed that with some tweaking, it could get much better stock performance. “Today eBay suffers from an inefficient organizational structure, wasteful spend and a misallocation of resources,” Elliott wrote at the time. At the same time, Elliott encouraged the company to concentrate on what it saw as its primary value proposition, as an eCommerce marketplace. That meant getting rid of any pieces that didn’t serve that mission including StubHub, the online ticket selling marketplace.

Perhaps it’s not surprising then that today’s announcement indicates the company is going through a review of operations and taking stock of its assets including StubHub. “These initiatives include an operating review and the commencement of a strategic review of the Company’s portfolio of assets, including StubHub and eBay Classifieds Group. eBay has worked collaboratively with Elliott Management, Starboard Value, and other significant shareholders on these initiatives, which include the addition of two new independent directors to the Board,” eBay indicated in the announcement.

These new board members include Jesse Cohn from Elliott Management and Matt Murphy from Marvell Technology, as the company begins to shift its focus.

The company announced earlier it was also moving the online marketplace, the key strategic asset of the company, according to Elliott, under a single global management team instead of the regional approach it had been taking. The company also announced plans to increase the advertising budget for the marketplace, according to the release.

These moves come as eBay tries to find a way to increase shareholder value to please activist investors like Elliott Management and Starboard Value. In a statement, Devin Wenig, company president and CEO tried to put the best face on these changes. “The bottom line is that we all share common ground: we see tremendous opportunity ahead and want to see eBay’s full potential realized over the long-term. The initiatives we are announcing today are the result of this constructive dialogue,” he said.

 

Ebay restructures regional operations, lays off a percentage of its workforce

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Elliott Management letter puts eBay on notice to improve stock performance, sell StubHub

Elliott Management, a NYC investment firm well known for its activist streak, released a letter today sent to eBay’s management. The letter put the company on notice that the stock needs to do better, much better. And it outlined a five-step plan, including selling StubHub, it believes can get eBay there.

Elliott is making this request as managers of funds owning more than 4 percent of eBay’s stock. It believes that with some tweaks, the company stock, which sits at $33.71 this morning (up over eight percent) could be worth substantially more. In fact, the company believes if eBay follows its advice it could increase the stock price to $55-$63 per share.

Elliott, which doesn’t tend to be subtle in its assessments of a company’s performance, didn’t pull any punches in its statement regarding the letter to eBay. “Despite its remarkable history as one of the world’s largest e-commerce platforms, eBay as a public-company investment has underperformed both its peers and the market for a prolonged period of time.”

While the letter took great pains to compliment the company, pointing out that it has successfully morphed from an auction marketplace for used goods to a full-fledged eCommerce marketplace in its own right, it was clear that it believed eBay is grossly underperforming.

The firm dug into the issues, as it sees them, in the letter itself. “Over the past five years, eBay’s total return has been more than 100% lower than peers and ~35% to ~65% lower than the technology indices. Moreover, eBay has declined 20% over the past year alone relative to a roughly flat equity market,” Elliot wrote in the letter.

It went on, “Most disappointing, however, is that this significant underperformance has occurred despite strong end-market performance. As the broader internet universe has flourished, especially e-commerce peers, eBay’s stock has floundered.”

The company didn’t just complain though. It outlined a five-step plan to improve the stock. For starters, it wants eBay to look carefully at moving StubHub and eBay’s classified properties and concentrate more fully on the core marketplace, which it believes is the true gem here.

Along those same lines, the company wants eBay to revitalize that marketplace, which it believes has been mishandled badly. “eBay’s Marketplace is a strategically valuable asset that has weathered prolonged, self-inflicted misexecution. Management should turn its singular attention to growing and strengthening Marketplace,” Elliott wrote in the letter.

It also believes the company could improve its operational efficiency. “Today eBay suffers from an inefficient organizational structure, wasteful spend and a misallocation of resources,” Elliott wrote. Next, it wants more capital returned to stockholders and finally it needs a management review and greater oversight.

eBay did not respond to an email request for comment on this proposal. If that changes, we will update the article.