Twilio faced activist investor pressure for nearly a year, prompting calls for board changes and a potential sale and the resignation of its founder, Jeff Lawson, in January.

Anson Funds, the activist group advocating for change at Twilio, is intensifying its campaign following recent board adjustments this week, including overhauling its board's structure.

On Monday, Twilio unveiled a settlement with Sachem Head, an activist investor whose prior involvement in the company went unreported. This agreement led to Twilio granting a board seat to Andy Stafman, a partner at Sachem Head.

Twilio Seeking Shareholders' Approval of Annual Reelection

Twilio announced two days later that Byron Deeter, a notable venture capitalist and early investor, would depart from the board. In the same release, Twilio disclosed its intention to seek shareholder approval at the upcoming annual meeting to declassify its board, which would entail that all directors, rather than just a portion of them, would be subject to reelection annually.

Anson Funds Activist's Dissatisfaction

In a press release on Thursday, Anson portfolio manager Sagar Gupta expressed dissatisfaction with the agreement, considering it only a small step forward. He believes it did not address the ongoing issues with Twilio's board and its underperformance. In the future, Gupta plans to hold the entire board accountable on behalf of all Twilio shareholders.

Gupta mentioned that Twilio consistently turned down proposals for governance enhancements during months of discussions and only addressed those concerns when faced with significant pressure.

Twilio's shares have declined by 21% over the year, contrasting with the Nasdaq's nearly 7% increase.

Gupta initiated his campaign at Twilio in early 2023, reportedly holding a series of meetings with the company during his tenure at Legion Partners. Twilio's dual-class structure was winding down at that time, resulting in CEO Lawson's reduced control.

Vocal Demands on Share Buyback Program

Later that year, Gupta transitioned to Anson and continued the activist challenge. Concurrently, Legion Partners persisted in advocating for changes at the company, as CNBC previously reported.

According to FactSet, Anson and Legion each own less than 0.5% of Twilio. They have made vocal demands that have led to an expanded share buyback program, the departure of Lawson, and an operational review of a business segment the firms wanted Twilio to divest. However, they have not achieved all of their objectives.

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Twilio's Refusal of The Buyback

In March, Twilio concluded the operational review, opting not to sell Segment's business unit and approving a share buyback program smaller than the two activist investors had requested.

On March 11, shortly after Twilio completed the review, Sachem Head informed the company of its intention to nominate board candidates. This communication was made public this week, coinciding with Stafman being appointed to the board. Sachem Head, managing $4 billion in assets, is currently involved in two other European activist campaigns.

Gupta stated on Thursday that Anson would scrutinize all matters related to strategy, operations, and governance. He noted that Twilio announced Deeter's departure while discussions were ongoing between Anson and the company's advisors.

Anson also pointed out unspecified related-party transactions between Twilio and Deeter's employer, Bessemer, which they claim have previously disadvantaged Twilio stockholders.

In 2018, Twilio acquired SendGrid, also backed by Bessemer, for $2 billion. Deeter was a director at both companies during that period, although he abstained from negotiations. Bessemer declined to comment on this matter.

Bessemer declined to comment for this story. Even with Deeter's departure, Bessemer still has representation at Twilio. The company's chairman, Jeff Epstein, serves as an operating partner at the venture firm. According to Gupta, this issue remains relevant despite Mr. Deeter's departure, given the continued directorship of another Bessemer partner.

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