Twilio co-founder Jeff Lawson said Monday he is stepping down as chief executive and board chairman amid pressure from activist investors. TWLO stock rallied.
Twilio named Khozema Shipchandler, the president of Twilio Communications, as its new CEO. Jeff Epstein, current board member and lead independent director, will assume the role of board chair.
"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 said in a blog post.
Twilio Stock: More Developments To Come?
Lawson's departure appears to offer lessons to other companies that give founders super-voting rights. Under Twilio's governance rules, Lawson's founder shares in the company gave him special voting rights at the time of its 2016 initial public offering. The super-voting rights were in effect for seven years and expired last year.
As a result, Lawson suddenly became vulnerable to pressure from activist investors or a private equity buyout.
"This transition comes following increased activist pressure through 2023, with firms Legion Partners and Anson Funds building separate stakes in the business and pushing for more change, including for TWLO to sell the entire company, or divest its data and applications business," said TD Cowen analyst Derrick Wood in a report.
Meanwhile, Anson Funds issued a statement from portfolio manager Sagar Gupta.
"As we've previously discussed with Twilio's Board of Directors, we believe Founder Jeff Lawson's departure from the company would be a step in the right direction and are pleased with the leadership change announced today, Gupta said. "That said, we believe that more actions are needed to maximize value for shareholders. We look forward to continuing to engage with Twilio's board and management team going forward."
TWLO Stock: 2023 Restructurings
Twilio's growth slowed sharply after the Coivid-19 emergency ended. The company also struggled in the aftermath of an aggressive acquisition spree.
Twilio in December announced its second workforce reduction in 2023.
"Given these challenges, Monday's announcement does not come as a surprise to us, especially as there has been growing noise about activist involvement and a desire to make leadership changes," said William Blair analyst Arjun Bhatia in a report.
On the stock market today, TWLO stock rose 6.7% to close at 73.64. With the gain, Twilio stock is still down 3% in 2024 after falling for three years. However, TWLO stock recently formed a double-bottom base, a bullish signal.
In tandem with announcing leadership changes, Twilio said it expects to report revenue and adjusted operating income above the high end of its guidance range for the fourth quarter of 2023.
The new CEO, Shipchandler, served as Twilio's chief financial officer from 2018 to 2021 and as chief operating officer from 2021 to 2023. Before joining Twilio, Shipchandler served as the CFO of GE Digital, a division of General Electric.
Twilio Stock: Dual-Class Shares
The super-voting rights governance structure is common for many tech companies. They include Facebook-parent Meta Platforms, Shopify, Lyft, Pinterest, Zoom Video Communications, CrowdStrike and Datadog.
Dual-class shares have been controversial. Critics worry about creating corporate monarchs who don't answer to shareholders. How long the super-voting rights remain in effect varies.
The governance structure makes it difficult for tech companies to be acquired unless a founder or CEO gives the nod. The voting structures also ward off activist hedge funds seeking quick changes in market focus or strategy.
Follow Reinhardt Krause on X, formerly called Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
