Shares of cloud-based communications software specialist Twilio (NASDAQ:TWLO) popped sharply higher on Monday. News broke that Twilio co-founder Jeff Lawson will resign from the CEO role amid mounting activist pressure. Since late October, TWLO stock has engineered a conspicuous recovery effort. Still, experts believe Lawson’s exiting might not be enough to appease the activists.
According to a CNBC report, a regulatory filing announced the move. Also, in the same document, Twilio disclosed that it expects fourth-quarter revenue and income to land above its prior guidance. Thanks to the encouraging news, the market quickly bid up TWLO stock. Still, it’s bittersweet news for the embattled software company.
“The time has come for me to pass the reins of this extraordinary company to a new CEO to lead Twilio through its next chapter,” Lawson remarked in a corporate blog post. In addition, he will step down from the company’s board of directors, where he previously served as chairman.
Moving ahead, Khozema Shipchandler, a longtime Twilio executive, will take over the helm, effective Monday. Shipchandler will take a board seat as well. Jeff Epstein, a current board member and partner at Bessemer Venture Partners, will replace Lawson’s seat as chairman.
TWLO Stock May Still Have Difficult Roads Ahead
In the trailing 52 weeks, TWLO stock gained roughly 46% of its equity value. That was largely helped by a significant run between Oct. 27 and Dec. 19 of last year, when shares soared more than 55%. At the same time, in the past five years, TWLO lost more than 24%. It’s also well off from its highs when it exchanged hands above $400.
Still, Shipchandler gave no indication that he was intimidated by the challenge of restoring credibility to TWLO stock. “I am honored to step into the CEO role,” the newly minted head executive said in a release. Interestingly, he mentioned that Twilio would take a harder look at “underperforming” businesses. In theory, that would be in line with what activists have sought.
In late November, Anson Funds hired portfolio manager Sagar Gupta from Legion Partners. At both firms, Gupta helped build a stake in TWLO stock for the purpose of influencing key business decisions. In early June of last year, Legion demanded that the software specialist change its board and consider divestitures.
At Anson, Gupta requested the sale of the enterprise or, at minimum, the divestiture of its data and applications unit. As such, market experts believe that Lawson’s stepping down will not fully satisfy either Anson or Legion.
Why It Matters
Last month, Twilio announced layoffs that would impact around 300 employees or roughly 5% of its workforce at the time. It didn’t escape notice that the most affected business unit was the firm’s data and applications unit, the very one that has aroused activist attention. With that development not assuaging criticisms, TWLO stock may still face challenges ahead.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
