Twilio gains on report activist Legion Partners pushing for changes
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Twilio (NYSE:TWLO) rose 11% amid a report that activist investor Legion Partners has met with the company and is pushing for changes.
Legion Partners has met several times with the board and management and is urging the company to make board changes and evaluate divestitures, according to a report in The Information on Tuesday, which cited people familiar with the situation.
"We think that there is a good underlying asset and, despite checks indicating incremental commoditization of the core CPaaS market, that Twilio still has time to leverage its large installed base and move up the stack with higher-margin Data & Applications," RBC analyst Rishi Jaluria, who has a sector perform and $55 price target on TWLO, wrote in a note on Wednesday.
Jaluria argues that an activist can push for management and board changes, greater emphasis on integrating Segment, divesting Flex, and exploring an outright sale of Twilio (TWLO). Twilio could be an attractive target for a larger platform, though there are only a few strategic buyers, such as Amazon's (AMZN) AWS who would make sense as acquirers.
The Legion discussions with the board and management come at an important time for Twilio (TWLO) as the use of supervoting shares is set to expire in less than a month, according to The Information report. Other activists have considered targeting Twilio in the past, though the supervoting share issue was viewed as an obstacle.
Barclays analyst Ryan MacWilliams wrote that while Legion Partners has CPaaS experience as an activist, the special situations angle for Twilio (TWLO) is "less straightforward." MacWilliams highlighted that Legion was previously engaged with Vonage and received a board seat in 2019, and the company was sold to Ericsson in 2022. Barclays has an equal weight and $50 price target on TWLO.
Legion Partners indicated in its latest 13F filing that it owned 600,000 shares of Twilio (TWLO).
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