A fifth activist investor has taken a stake in Club holding Salesforce (CRM), making loud and clear that well-respected hedge funds see a money-making opportunity in the enterprise software giant. While that many activists in one stock is certainly unusual, we welcome the scrutiny and any push that boosts shareholder value. Dan Loeb’s Third Point Management is the latest known investment firm with a position in Salesforce, CNBC’s Scott Wapner confirmed Thursday. The size of Third Point’s stake and specific plans are not yet clear, according to The Wall Street Journal, which first reported the story Wednesday night. “This doesn’t happen very often,” said Emory University finance professor Wei Jiang, who has extensively researched activist hedge funds and corporate governance. With activist investing becoming more common since the Great Financial Crisis, Jiang said it’s not unheard of for a single company to be targeted by multiple firms. But for five prominent activists to concurrently and publicly take aim at the same company? It is “definitely an outlier,” she added. The basic reason activists went after Salesforce is pretty standard, though, according to Jiang. The company has a lot of unhappy shareholders who have seen the value of their investment plummet, she explained. The Club is certainly among them. Looking at a long-term chart, Salesforce closed at an all-time high of roughly $310 per share on Nov. 8, 2021. But then, the stock began a prolonged slide lower. The stock had lost 58.6% of its value over the next 13 months, closing at a multiyear low of $128.27 per share back on Dec. 16. CRM 5Y mountain Salesforce (CRM) 5-year performance On Thursday, Salesforce, a Dow stock, rose nearly 2.4% to more than $173 per share — managing to stay green even in the market’s big late-session reversal, which saw the The Dow Jones Industrial Average gave up a more than 300-point gain to close down nearly 250 points. Salesforce has gained more than 30% in 2023, joining many struggling tech stocks benefitting from a broader rotation back into last year’s biggest losers. Positive headlines tied to activist pressure at the company also helped shares. Third Point’s newly revealed stake adds to an activist cavalcade at Salesforce that publicly began in October when Starboard Value disclosed a position in the company and lamented its “subpar mix of growth and profitability” in recent years. Elliott Management, ValueAct Capital and Jeff Ubben’s Inclusive Capital have all amassed stakes in Salesforce, which has experienced slowing revenue growth, leadership turnover and job cuts. It’s created an unusual situation at Salesforce, run by influential tech entrepreneur Marc Benioff. Co-founder Benioff is now back as sole chief executive after co-CEO Bret Taylor officially departed at the end of January. The Salesforce trade has grown more crowded since then, so hopefully, there are not too many conflicting views on the direction the company should take. Jim Cramer said Thursday that while Benioff should be open to good ideas, he is integral to the company and its future success. To be sure, some of Salesforce’s stock struggles last year stemmed from Wall Street’s general turn against growth-oriented technology companies whose attractiveness diminished due to the Federal Reserve’s hawkish turn. But investors have had specific bones to pick with Salesforce, including a belief — echoed by Starboard and others — that its profitability was inadequate for a company with maturing revenue growth. Salesforce has pleased investors recently with a cost-cutting initiative that featured a 10% reduction in its workforce — and then, a shakeup to its board of directors. Former Carnival cruise line CEO Arnold Donald, Mastercard CFO Sachin Mehra and ValueAct CEO Mason Morfit will join Salesforce’s board, effective March 1, while a pair of longtime directors, Sanford Robertson and Alan Hassenfeld, are not standing for reelection. Last year, Salesforce also announced a $10 billion stock buyback program, the first in company history, to help manage shareholder dilution. There could be more changes coming to Salesforce. The Wall Street Journal has reported that Elliott Management is preparing to nominate candidates for Salesforce’s board. The window to do so opens Sunday and closes March 14. Salesforce does not have a staggered board, meaning all members are up for reelection at once at the company’s annual shareholder meeting, typically held in June. Bottom line Third Point joining the fray at Salesforce confirms what we’ve been saying for months: There’s a big opportunity to unlock value at the company. There’s been no shortage of tech stocks that have been crushed since the Fed’s hawkish pivot in late 2021, which in theory means these high-profile activists have ample companies to potentially target. The fact they’ve settled on Salesforce is an encouraging sign, reflecting favorably on its enterprise software and its important role in the digital age. We’ve been pleased to see Salesforce shares start to recover in 2023 and maintain our buy-it-here 1 rating on the stock. That said, we recognize it’s still got a long way to go before it returns to its old highs. (Jim Cramer’s Charitable Trust is long CRM. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. 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Pedestrians near the Salesforce Tower in San Francisco, California, on Wednesday, Jan. 25, 2023.
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A fifth activist investor has taken a stake in Club holding Salesforce (CRM), making loud and clear that well-respected hedge funds see a money-making opportunity in the enterprise software giant. While that many activists in one stock is certainly unusual, we welcome the scrutiny and any push that boosts shareholder value.
