When Elliott Management said it had taken a multi-billion dollar stake in software giant Salesforce on January 23, it appeared that Salesforce CEO and cofounder Marc Benioff might be in for a bruising activist battle. Even when Salesforce announced days later that it had reached an agreement with another shareholder activist — ValueAct Capital — to put its CEO and CIO Mason Morfit on the Salesforce board, Elliott was still readying a slate of directors in anticipation of a proxy battle.
But days before the end of the first quarter, Elliott and Salesforce put out a statement saying they had reached an agreement and Elliott had withdrawn its slate. The pugnacious hedge fund did not get a seat on Saleforce’s board, and now it’s not clear that Elliott ever owned even one share of Salesforce’s common stock. If so, it has sold out. As of the end of March, Elliott owned no Salesforce common stock, according to its just filed 13-D with the Securities and Exchange Commission. (Elliott declined to comment.)
As is common with activists, Elliott is likely to have made some or even all of its stake in swaps, according to an individual familiar with the situation. Those aren’t disclosed to the SEC — at least not yet. (One of the SEC’s new rule proposals would force hedge funds to disclose their swaps positions, which now appear as holdings of the banks that do the trades.)
Several other hedge funds, however, did take new positions in Salesforce common stock during the first quarter, while others had taken big positions late last year after activist Starboard Value became the first to pounce on Salesforce. As a result, Salesforce has become something of a hedge fund hotel; about two dozen well-known hedge funds owned the stock as of March 31.
Value Act and Farallon Capital own the most stock of all the hedge funds. Each had about 3.5 billion shares at the end of the first quarter.
Those who took initial stakes during the first quarter include activist funds like Third Point, which bought 800,000 shares, and Sachem Head, which scooped up 537,100 shares.
Tech-focused firms also jumped in during that period. Among them were Whale Rock, with 743,794 shares; D1 Capital, with 557,412 shares; Dorsal Capital, with 550,000 shares; and Coatue, with 279,723 shares. Senator bought 200,000 shares, and Soros Capital — a family office run by Robert Soros — bought 75,500 shares, while Sandler Capital bought 52,870 shares.
ValueAct, which only got its board seat in January, now has a much bigger stake than it did last year. At the end of 2022, the activist hedge fund had only a small position of 560,221 shares. This past quarter, however, it increased its holdings by nearly 300 percent, adding 2,873,349 shares. Salesforce is now 11 percent of ValueAct’s portfolio and its fourth biggest position.
Lone Pine Capital added 1,486,293 shares, which was a 270 percent increase over the prior quarter. As of the end of March, it had the fourth biggest Salesforce position of hedge funds, with a little over 2 million shares.
Those who either jumped in this year or bolstered their positions have had a good run. The stock is up 54 percent this year, trading Tuesday around $202 per share, compared with the $151 per share the day before Elliott’s position was revealed. The stock took off even more after it announced bumper results on March 1 that addressed some of the issues activists had highlighted.
The stock had been trading around $153 on Oct. 18 of last year when the first activist in Salesforce — Starboard Value — announced an activist stake at the 13D Conference in New York, offering a power point that laid out why Starboard thought Salesforce was trading at a discount to its peers, saying the company had a “subpar mix of growth and profitability.”
By the end of last year, Starboard had amassed a 3 million share position, making it the fifth-biggest position for the hedge fund. It sold 494,999 shares, or 16 percent of its stake, during the first quarter, leaving it with 2.5 million shares. Salesforce is now its third-largest position, representing 9 percent of its portfolio. (Starboard now ranks third among hedge funds in ownership of Salesforce.)
The same day Starboard announced its activist play, Inclusive Capital, the small hedge fund launched by former ValueAct founder Jeff Ubbens, revealed it had taken a 1 million share stake. By the end of the first quarter, however, Ubbens had sold out entirely.
Others that took huge stakes in the fourth quarter but sold a significant portion this year include DE Shaw, which sold 2,249,725 shares, or 85.8 percent of its position; Point 72, which sold 2,014,387 shares, or 60 percent; Citadel, which sold 1,528,218 shares, or 84 percent; Millennium, which sold 1,465,538 shares, or 48 percent; Two Sigma, which sold 1,364,268 shares, or 99.3 percent; Balyasny, which sold 858,592 shares, or 97 percent; Soros Fund Management (George Soros family office), which sold 474,066 shares, or 74 percent; Hudson Bay, which sold 368,000 shares, or 71 percent; Farallon, which sold 279,000 shares, or 7 percent; and Eminence Capital, which sold 230,832 shares, or 20.7 percent.
