LOS ANGELES - In a move to enhance shareholder value, Legion Partners Asset Management, LLC, a significant shareholder of Twilio Inc. (NYSE:TWLO), has proposed that the cloud communications platform initiate a process to sell its Segment business and expand its stock buyback program by at least $3 billion.
Legion Partners, with a stake of 601,050 shares in Twilio, outlined its strategy in a letter to Twilio's Board of Directors today. The investment firm has been actively engaged with the company over the past year, advocating for operational and governance improvements to drive long-term returns. Despite acknowledging Twilio's efforts to reduce costs and initiate its first stock buyback program, Legion Partners believes the company's valuation does not reflect its true potential.
Citing a detailed analysis, Legion Partners estimates that Twilio's Communications business is currently trading at a multiple of only 7.0 times its projected 2025 Adjusted EBITDA. The investment manager contends that selling Segment, which they value at approximately $1 billion, could benefit from different ownership and has been underperforming within Twilio.
Furthermore, Legion Partners suggests that Twilio has the financial capacity to significantly expand its stock buyback program, given its cash flow over the last year. They argue that these actions could unlock a conservative estimated stock value of over $90 per share for Twilio, a substantial increase from its current market capitalization.
This recommendation comes as part of Legion Partners' broader strategy to promote strong operational discipline and governance in the companies within its investment portfolio. The Los Angeles-based activist investment manager focuses on U.S. small-cap companies and employs a value-driven approach to managing its concentrated portfolio.
The information for this article is based on a press release statement issued by Legion Partners Asset Management, LLC.
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