Activist investors in Salesforce spell good news for shareholders like us

Published Mon, Jan 23 20232:25 PM ESTUpdated Mon, Jan 23 20232:34 PM EST

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

Pressure from activist investors is mounting at Club holding Salesforce (CRM). And that's a bullish development for shareholders in the enterprise software giant, which has seen its stock price flounder for more than a year. The latest investment firm to target Salesforce is hedge fund Elliott Management, which has amassed a multibillion-dollar stake in the company, CNBC confirmed Monday. News of Elliott's investment in Salesforce was first reported by The Wall Street Journal . Elliott looks forward to "working constructively with Salesforce to realize the value befitting a company of its stature," Jesse Cohn, a managing partner at the firm, said in a statement. The hedge fund is known for its activism in the tech sector and, in the past, has taken seats on the boards of directors of companies such as Twitter, eBay (EBAY) and, most recently, Pinterest (PINS). Cohn served on both Twitter's and eBay's boards. As a result, the Club wouldn't be surprised to see Elliott push for representation on Salesforce's board, which is elected each year at the company's annual shareholders meeting, typically held in early June. Shares of Salesforce rose more than 3% Monday, to nearly $157 apiece. The gains add to the stock's strong start in 2023, up about 16%. However, shares remain down almost 50% from their all-time closing high of $309.96 a share, in November 2021. Elliott's investment in Salesforce comes roughly three months after activist investor Starboard Value disclosed a position in the company. Starboard has said it sees "significant opportunity" for Salesforce to expand its operating margins and become more profitable. Starboard — seemingly the first activist to publicly target Salesforce — has centered its campaign for a business restructuring largely on concern over a "subpar mix of growth and profitability," which has weighed on the company's valuation. More broadly, growth-oriented tech stocks like Salesforce have struggled over the past 14 months, since the Federal Reserve moved to dramatically raise interest rates in response to the hottest U.S. inflation in decades. Salesforce has been squeezed by growing fears of a recession, with many of its corporate customers pulling back on spending on cloud software products. Salesforce in early January outlined a cost-cutting plan that includes a 10% reduction in its workforce. Those layoffs, which were pushed by Starboard , come amid a wave of job cuts in the technology sector and are expected to lower expenses and boost profitability. Bottom line Just as the Club welcomed Starboard's stake, Elliott's presence is positive, too. Moreover, Jim Cramer has said, at least two other investors with activist backgrounds, including Jeff Ubben , have taken a stake in Salesforce. It is significant to see this much activist activity concurrently in the same company. And it makes clear the quality of Salesforce's software and the integral role it plays in doing business in the digital age. If these high-profile investors thought Salesforce was irreparably damaged company, whose tech was at a competitive disadvantage, they may have looked elsewhere. Instead, they clearly believe there is plenty of value that can be created at Salesforce. That's good news for the rest of us shareholders. (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. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Salesforce

Noam Galai | Getty Images