Activists, Activate

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What's going on?

Reports out on Monday show activist investor Elliott Management has got its teeth into Salesforce.

What does this mean?

Poor old Salesforce has hit a slump. Sure, the firm’s not quite moping around in its PJs all day and eating Ben and Jerry’s from the tub, but it has let itself go: growth’s gone all slack, and the company’s market value has fallen to about half its 2021 peak. And now the down-on-its-luck firm’s caught the eye of activist investors – that’s plucky financiers who buy chunks of companies to dust them off, spruce up operations, and ultimately boost share prices. Big-name Elliott Management has reportedly grabbed a multi-billion-dollar slice of the Salesforce pie, following in the footsteps of fellow activist Starboard Value, which claimed a stake in October. That’s going to pile a whole lot of pressure on Salesforce’s management team, an idea investors seemed to like: they sent the firm’s shares up when news broke.

Why should I care?

The bigger picture: Activism’s on trend.
Elliott’s stake in Salesforce is part of a new wave of activist investing that’s sweeping hard-hit global markets. Case in point: by Bloomberg’s count, a massive 177 activist campaigns were announced last quarter – the most since 2018. And we’re not just talking about small fry: along with Salesforce, other giants like Disney and Bayer have been targeted in recent months too.

Zooming out: Unwanted attention.
Being courted by an activist investor is no bed of roses. After all, any activist’s main goal is to boost shareholder returns – and that doesn’t always mean improving the company’s fate in the long run. In fact, research shows that a company’s value tends to spike the year after it’s targeted, only to drop off compared to its “untargeted” peers over time. And that’s not to mention the fact that activists tend to nix companies’ long-term investments and efforts at corporate responsibility…

Originally posted as part of the Finimize daily email.

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