Wednesday's Headlines: A Major Shakeup For Zendesk?

Wednesday's Headlines: A Major Shakeup For Zendesk?

Here were the biggest movers in the MyWallSt shortlist yesterday:

Moving Up ⬆️

FedEx (FDX) +14.4%

Trip.com Group (TCOM) +8.0%

Farfetch (FTCH) +5.5%

DraftKings (DKNG) +5.3%

2U (TWOU) +4.7%

Moving Down ⬇️

Berkshire Hathaway (BRK.B) -10.1%

Zillow (Z) -6.4%

Brown-Forman (BF.B) -5.0%

Zendesk (ZEN) -4.9%

Redfin (RDFN) -4.9%

 

Here are the stories that you need to know ahead of market-open today, Wednesday the 15th of June:

 

Zendesk Continues Its Restructuring Talks 🗣

Zendesk (ZEN) stock is down in pre-market trading this morning as it continues negotiations with the activist investor firm, Jana Partners, over potential restructurings within the company.

Last week, Zendesk announced that it has decided to remain an independent public company after conducting a “strategic review” of its operations over the past few months, which included the solicitation of offers from parties that could have potentially merged or taken over the business. This review had been pushed by Jana Partners — which owns a 2.5% stake in Zendesk — after voting down Zendesk’s planned acquisition of Momentive Global for $4.1 billion back in February.

Now, with the shadow of a proxy fight looming large, it seems that Zendesk management has come to the table to discuss a truce with Jana. Though nothing has been confirmed yet, it appears that Zendesk's CEO might step down, as well as other changes to the board.

Zendesk is a software company that specializes in solutions for customer service and customer relationship management for other businesses. Though the company has struggled over the past year or so — like most other SaaS businesses — it would be a major shakeup to see CEO Mikkel Svane step down, who co-founded the company and led it since 2007.

 

Redfin Announces Almost 500 Job Cuts ✂️

It’s been a bad week for job cuts already, but things look to be getting worse as the digital real-estate company Redfin (RDFN) announced that it would be cutting 6% of its workforce — 470 people — by the end of the month.

In a blog post published yesterday, CEO Glenn Kelman said: “With May demand 17% below expectations, we don’t have enough work for our agents and support staff. We could be facing years, not months, of fewer home sales.” This came off the back of another report issued by the company earlier this week that showed the slowest rate of growth in homebuyers' budgets for more than two years.

With interest rates rising in an effort to combat inflation, mortgage rates are also spiking, which is dampening the coals of what was a red-hot housing market. According to Kelman, Redfin had to hire as many as 1,000 new employees in some months throughout 2020 and 2021 just to keep up with demand on the platform. Now, with the prospect of a protracted market slowdown, Redfin is taking these measures to reduce costs, as well as pausing other expansion plans.

More broadly, the market has seen numerous lay-off announcements in the past few days from the likes of Coinbase, Sea Limited, and Warner Brothers. Though the specificities differ in each case, the wider picture is that companies are now rapidly trying to enact cost-cutting measures as more than a decade of high-growth draws to a close and the threat of recession looms.

 

FedEx Increases Dividend 💰

Package-delivery specialist FedEx (FDX) has boosted its quarterly dividend by 53% to $1.15 a share. It will also add three new board members and make changes to its executive compensation package.

The company is looking to improve shareholder returns after a year of underperformance, thanks to pressure from activist investor D.E. Shaw. However, The Wall Street Journal reported that both the executive compensation package and the dividend increases were made outside of the agreement with D.E. Shaw, which was only responsible for the additional board seats.

The changes come just weeks after the departure of long-term CEO Fred Smith, who was replaced by his lieutenant Raj Subramaniam. Again, this was a decision made outside of D.E. Shaw’s influence and as part of a long-term succession plan.

FedEx was long seen as a potential activist target thanks to inefficiencies with its operations. The company operates its Express division — which handles priority packages and utilizes the company’s own fleet and employees — separately from its Ground division that relies on local contractors to operate their own routes. This means that there are often overlaps in routes, with separate deliveries even arriving to the same house on the same day.

D.E. Shaw’s influence on the board will look to optimize the company’s delivery routes and streamline operations to avoid these kinds of reduncdancies in the future. The company had an obvious boon over the pandemic as more and more customers turned to e-commerce, and like many who did well over the period, it is now experiencing a post-pandemic hangover, with the stock down roughly 25% over the last year.

A much more attractive dividend yield, combined with a new CEO on a quest to operate a more efficient delivery system has piqued the interest of Wall Street and the stock was up 14% on the news.

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