Twilio, the communications API company, has recently come under the scrutiny of activist investors as its stock price continues to plummet. Anson Funds and Legion Partners have reportedly been pressuring the company to make changes in order to improve its financial performance.
Key Takeaway
Twilio, the communications API company, is facing pressure from activist investors amid a substantial decline in its stock price. The company has responded by implementing cost-cutting measures, including layoffs, in an effort to improve its financial performance. The effectiveness of previous acquisitions is also being called into question. The outcome of this battle between Twilio and activists remains uncertain, and the company’s future trajectory will likely depend on its ability to address investor concerns and regain stability.
Cutting Costs through Workforce Reductions
In response to the pressure, Twilio has announced a new round of cost-cutting measures, including a 5% reduction in its workforce. This comes on the heels of previous layoffs in September 2022 and February 2023, which amounted to reductions of 11% and 17% respectively.
While the timing of these layoffs during the holiday season may not be ideal, it appears that Twilio felt compelled to make these moves in order to appease the activist investors and demonstrate its commitment to improving its financial position.
Questionable Acquisitions and Decreasing Stock Price
At its peak valuation, Twilio made significant acquisitions, including the $2 billion purchase of SendGrid in 2018 and the $3.2 billion acquisition of customer data platform Segment in 2021. These moves were intended to enhance Twilio’s capabilities by integrating customer data with its core communications APIs.
However, with the stock price now in the $60s, these acquisitions appear extravagant in retrospect. The decreasing stock price and the financial challenges facing the company raise concerns about the effectiveness of these acquisitions and call into question Twilio’s overall strategy.
Vulnerability in the Face of Activist Pressure
With activist investors exerting pressure and the stock price continuing to decline, Twilio finds itself in a vulnerable position. The outcome of this battle is uncertain but may resemble the situation faced by Zendesk, which was eventually sold off to private equity, rather than Salesforce, which successfully defended against activist investors.
The key question now is whether the activists’ concerns are justified considering the significant decrease in stock price, the questionable acquisitions, and other negative financial indicators. The future direction of Twilio may hinge on how the company responds to these concerns and whether it can regain stability and investor confidence.
