💃 Salesforce + Activist Investor = More ChaCha?! 🕺

Good morning, Salesforce Nerds! No doubt you have heard the news that Paul Singer's activist hedge fund, Elliot Management, bought a multi-billion dollar stake in Salesforce. How will this impact Salesforce's diminishing stock (up over 2% since the day of the announcement)? Will this impact the product offerings? Will there be more layoffs? Let's look at activist fund strategies and see how this may affect Salesforce.

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Salesforce + Activist Investor = More ChaCha?!

What is an Activist Investor?

An investor who stakes a large share of a public company with the intent to influence company strategy to make a profit. Elliot Management is a particularly aggressive activist investor, led by the founder Paul Singer and his right-hand for tech investments, Jesse Cohn.

Typically, these are not long term investments. We will see Salesforce in the news cycle often in 2023, for better or worse.....

Why Should I Care?

Investors invest to make money. Activist investors are the same, and they intend to take an active role in making that happen, hence the name. This can come in the form of something simple like demanding shareholder dividend increases (note - Salesforce does not offer a dividend), or something more complex like pivoting a company strategy or even liquidating valuable components of the business.

Activist investors typically see the company they're investing in as valued at less than the sum of their parts. Breaking up the parts and selling them individually would net a larger return than the current market. For example, parting out your $20,000 car - tires, doors, glass, transmission, engine, etc - for $25,000 return. Recent acquisitions like Tableau and Slack may be prime for this. A less viable, but logical candidate may be Mulesoft, which Salesforce has struggled to grow and pricing remains prohibitive for most small and medium-sized businesses.

Maybe the strategy is to focus deeper on the core money makers. Sales Cloud is the best CRM on the planet, but that admin UX/UI is dated (check out Hubspot's admin UX/UI if you want to see what 2023 looks like). Maybe pricing changes to Mulesoft and Experience Cloud to make them more accessible to small and medium-sized businesses. Maybe better implementation and customer support for Marketing Cloud, the powerful but notoriously complex enterprise marketing solution. The array of product offerings Salesforce surely contributed to the massive hiring spree of the last few years, and diluted their ability to focus on what has made them successful - the best CRM in the world.

Whatever Elliot Management decides to peddle their influence in, it will focus on benefitting shareholders in the short term.

What's Included?

What's included in Elliot Management's stake in Salesforce? That is the multi-billion dollar question. We can look at past articles written about them

• Evolution of Elliot Management and outcomes of their activist investing in large tech companies - CNBC

• A clear intent to disrupt - Forbes

• A rare loss for Paul Singer and Elliot Group - they failed to remove Twitter's CEO-at-the-time, Jack Dorsey. They also exited their position about a year before Elon's takeover. Would make a fun case study - YahooFinance

Elliot Management has a track record of installing their people on the boards of their investments including Twitter, Ebay, Citrix and other large technology companies. It is likely they will push for the same with Salesforce, to have a seat at the table and entrench their influence and

They will definitely want to make a large profit in the first 0-3 years, and with the current tech-environment full of layoffs and falling valuations, it may be something radical. Even if they don't get their way, the mere play to disrupt may cause disruption. We have already seen an exceptional count of high-level executives leave Salesforce in the last 6 months. If anyone else was on the fence, they only need to read a few of the linked articles above to nudge them out the door.

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