Shares of Salesforce Inc. popped more than 6% in morning trading Tuesday after CNBC reported that activist investor Starboard Value LP had taken a “significant” stake in the software company.
The report noted that Starboard founder Jeff Smith shared with CNBC that he saw “significant opportunity” in Salesforce
shares, which had lost more than 40% of their value on the year prior to Tuesday’s open.
Starboard has a presentation deck on its website, dated October 2022 and earmarked for the 2022 Active-Passive Investor Summit, that mentions “three new opportunities to discuss today.” Those opportunities were Wix.com Ltd.
In the presentation slides, Starboard said that shareholders of Salesforce “have not seem the benefit of the company’s strong market position over the past few years,” as Salesforce has lagger the S&P 500
the Nasdaq 100 Index
and a basket of peers over a three-year span.
“Salesforce is currently trading well below peer multiples, despite the company’s leading market position, solid long-term growth profile, and significant margin-expansion opportunity,” Starboard said in the slides, while noting that the company’s valuation discount seemed “largely the result of Salesforce’s subpar mix of growth and profitability.”
While Salesforce’s growth has slowed, the company has not realized margins that one would expect from a company in its leadership position, the presentation stated. Starboard is upbeat about the efforts of Salesforce’s “refreshed management team” to enhance growth and profitability, however, and the Starboard team thinks the company’s margin targets “still leave significant room for improvement.” The company also has “an opportunity to significantly grow free-cash flow per share over the next few years,” per the presentation.
13D Monitor’s conference website said that the 2022 Active-Passive Investor Summit would be held Tuesday and that Smith was scheduled to speak at 8:30 a.m. Eastern.
Starboard didn’t immediately respond to a MarketWatch request for confirmation of the stake, nor did a Salesforce representative.
Salesforce shares are down 46% over a 12-month span, as the S&P 500 has lost 16% and as the Dow Jones Industrial Average
of which Salesforce is a component, has declined 13%.