Activist pressure increases on Twilio after Anson takes stake

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Activist investors are pushing software maker Twilio to sell the entire company, or divest one of its two business units comprising less than 20% of its revenue, two people familiar with the matter tell Our.

Anson Funds has built a stake in Twilio and sent a letter to the enterprise software company's board pushing for the sale of the entire business, a person familiar with the matter told Our.

The fresh push comes months after another activist firm, Legion Partners, made a similar push with the company, another person familiar said. Both spoke anonymously to discuss private communications freely.

Twilio shares closed up 3.6% Tuesday.

The company implemented a reorganization in February, creating two new business units: Communications, its larger historic business focused on messaging software and connecting to systems like SMS text messaging, and Data & Applications, which is newer and includes additional tools for improving customer engagement. A Twilio spokesperson told Our that the February reorganization "reflected input" from Twilio's shareholders. Nonetheless, Anson and Legion have urged the board to divest the former business unit if it can't secure a full sale to a strategic buyer.

Anson did not hold any Twilio stock for the period ended Sept. 30, according to securities filings, but has since built a stake valued at around $50 million, one person familiar said. Its letter to the board urges Twilio to either sell itself or, at a minimum, divest its data and applications business, this person familiar said.

The growth of the stake coincided with Anson's hiring of Sagar Gupta from Legion Partners. Gupta led Legion's activist engagements with Twilio and Nutanix, a cloud computing firm.

Legion Partners continues to maintain its $50 million stake in Twilio and has been making a similar pitch to Twilio's leadership and advisors: sell the company or refocus around its Communications business unit, the other person familiar said. Those efforts have continued even after Gupta's departure from Legion.

The news was previously reported by The Information.

"Twilio regularly engages with shareholders and appreciates constructive input that furthers our goal of creating sustainable long-term value," a Twilio spokesperson told Our in a statement.

The continued activist attention caps off a challenging year for Twilio, which makes software that helps businesses engage with their customers. The company's stock is up around 28% year to date but remains well off its 2021 highs. In February, the company cut around 1,500 employees, or 17% of its workforce citing a need for heightened efficiency. Those layoffs followed a similar headcount reduction in September 2022.

Tech acquisitions, while muted compared with pandemic levels, have seen some significant plays in 2023. In March, Silver Lake and CPP Investments announced a deal to take survey software company Qualtrics private in a $12.5 billion deal. IBM acquired software maker Apptio in a $4.6 billion cash deal announced in June. Cisco said it would take cybersecurity firm Splunk private in a $28 billion cash deal in September.

Co-founder and CEO Jeff Lawson helped start Twilio in 2008 and guided the company through its 2016 IPO. Twilio has a market cap of around $11.6 billion.

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