Twilio Under Pressure From Activist Legion Partners Seeking Strategic Overhaul: Report

Legion Partners, a prominent activist investment firm, is pressing for changes at the cloud services provider, Twilio Inc. TWLO. The ongoing dialogue highlights several key aspects regarding Twilio's operational and strategic outlook, as well as its current market position.

According to Reuters, Legion Partners is asking for the company to take "significant action." Twililio has declined to comment on the story following Benzinga's request.

Here are the critical points of the discussions:

• Dialogues and Advocacy: Legion Partners has conducted approximately six meetings with Twilio over recent months. They have urged for board reforms and potential divestitures. The investment firm has voiced concerns about Twilio's cost structure, balance sheet, and strategic alternatives, sources familiar with the matter told Reuters.

Also Read: Apple At WWDC: Expect Next Big-Product Details, Especially When It Comes To AI, Analyst Says

• Legion's Stake: According to regulatory filings, as of March 31, Legion Partners, known for its role in positioning directors on the boards at Bed Bath & Beyond and Kohl's, holds an estimated $40 million stake in Twilio.
• Supervoting Shares: CEO Jeff Lawson presently holds a nearly 22% voting stake due to Twilio's application of supervoting shares. However, this privilege is on the verge of expiration, in less than a month, according to a report from The Information, cited by Reuters. As of February, Lawson owned 3.6% of Twilio's stocks.
• Impact on Share Class and Shareholder Pressure: Post-expiration of supervoting shares, there will be a unification of all shares into one class. This change would lead to Lawson losing his voting stake and could potentially increase the company's susceptibility to shareholder pressure.
• Share Performance and Company Outlook: Twilio's shares experienced about a 5% boost following the report. Nevertheless, the company has recently faced a slowdown in demand for its cloud services. Earlier this month, the firm's projected revenue for the second quarter was below Wall Street's predictions.

In February, Twilio announced plans to boost profitability by downsizing approximately 17% of its workforce and shutting down some of its offices.

Now Read: 5 AI Stocks Outperforming Nvidia In May: Which One Will Be The Next AI Powerhouse — Or The One That Pops Like A Bubble?

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo: Shutterstock