Activist Starboard buys more Salesforce stock after first demanding change in 2022

Activist investor Starboard Value significantly increased its stake in Salesforce (CRM.N) by nearly 50% in the second quarter, bringing its total holding to 1.3 million shares as of June 30. This move signals renewed activist pressure on the software giant, especially as Salesforce's stock has declined almost 30% year-to-date, despite a strong 2023 performance. Starboard, an early proponent of changes at Salesforce, appears to be re-engaging, suggesting ongoing concerns about the company's efficiency and profitability amidst its recent market performance.

Analysis

Activist investor Starboard Value has significantly intensified its position in Salesforce (CRM), increasing its stake by nearly 50% to 1.3 million shares during the second quarter, which follows a 52% stake increase in the first quarter. This re-accumulation of shares is particularly noteworthy as it comes amid a challenging period for Salesforce, whose stock has fallen almost 30% since January and 9% over the last twelve months. While many activist investors exited their positions in mid-2023 after the company implemented operational and governance changes, Starboard's renewed conviction suggests a belief that further improvements in efficiency and profitability are required, a view publicly stated by its CEO late last year. This move contrasts with Starboard's 27% stake reduction in Autodesk (ADSK) following a settlement, indicating a strategic reallocation of capital towards what it perceives as a more compelling activist opportunity in Salesforce. The positive sentiment score of 0.5 for CRM in response to this news indicates that market participants view Starboard's increased pressure as a potential catalyst for unlocking shareholder value from the $223 billion software company.

Key Decisions for Investors

• Investors should view Starboard's escalating stake as a strong signal of perceived undervaluation and a potential catalyst for Salesforce, warranting close monitoring of any forthcoming activist campaigns or management responses.
• Given the stock's recent underperformance, it is prudent to re-evaluate Salesforce's execution on profitability and efficiency metrics, as these are the likely focus of Starboard's renewed engagement.
• Consider that the 'activist trade' on Salesforce may be re-igniting, which could lead to increased volatility and potential for strategic shifts within the company aimed at appeasing activist demands.
• While the 13F filing confirms a strong trend of accumulation, investors should recognize the data is as of June 30 and position sizing should account for potential changes in the fund's holdings since that date.