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Wall Street has increased its pressure on companies to get more efficient amid the ongoing stock market decline.
Bob Iger’s abrupt return to Disney as CEO this week is the latest example that investors are calling the shots.
Corporate titans like Meta’s Mark Zuckerberg and Alphabet’s Sundar Pichai have not been immune to the pressure from Wall Street.
When a company’s stock price rises, investors have little to complain about, but the opposite is true when stock prices are on the decline, as they have been for most of 2022.
The broad decline has sparked a wave of activist investors heaping criticisms and advice on companies once thought to be immune from this type of shakeup: tech companies.
These are four companies that have faced pressure from investors recently as their stock prices suffer.
Disney
Former Disney CEO Bob Chapek.
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The latest example is the shocking ouster of CEO Bob Chapek at Disney, with former-CEO Bob Iger returning to the position for the next two years after shares tanked amid mounting losses in its streaming business.
Disney stock has dropped 21% since Chapek’s appointment in February 2020 and is down 51% from its March 2021 peak, compared to the S&P 500’s gain of 27% and 3%, respectively.
The decline sparked activist investor Dan Loeb of Third Point to buy a $1 billion stake over the summer and urge the company to spin off ESPN. While Loeb eventually abandoned his plan, he struck a deal to add a member to Disney’s board.
Now, Disney is facing new pressure from Trian Fund Management’s Nelson Peltz, according to the Wall Street Journal. Peltz bought an $800 million stake earlier this month after Chapek reported weak fourth-quarter earnings and belatedly announced a workforce reduction.
Meta
Mark Zuckerberg
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Even Meta’s CEO and founder Mark Zuckerberg, who owns a majority of the company’s voting shares and has no obligation to listen to activists, has received sharp criticism, including from long-timer investor Altimeter Capital.
Meta stock has plummeted nearly 70% since the company changed its name from Facebook, signaling its all-in metaverse bet. Over the same period, the Nasdaq 100 has fallen just 27%.
That underperformance speaks to investors’ loss of confidence in the costly pivot to building a new computing platform that may never be adopted by the masses.
In response, Altimeter’s Brad Gerstner sent Zuckerberg a letter with a list of to-do items, including a headcount cut of at least 20%, cuts to annual capital spending of at least $5 billion, and limits to annual metaverse investment to no more than $5 billion. Since the letter was released, Meta announced a 13% workforce reduction.
Alphabet
Sundar Pichai
Brandon Wade/Reuters
Since its November 2021 peak, Alphabet has underperformed the Nasdaq 100 by 6%. That’s not terrible but also not great, given the search-giant has typically been viewed as a defensive profit machine that performs well during most, if not all, economic environments.
The underperformance sparked a letter from major investor TCI Fund Management this month, with the hedge fund advocating for CEO Sundar Pichai to cut costs by reducing its headcount, reducing its average salary, and limiting losses from its Other Bets division.
“It’s a poorly kept secret in Silicon Valley that companies ranging from Google to Meta to Twitter to Uber could achieve similar levels of revenue with far fewer people,” TCI said.
The investor added Alphabet should launch an aggressive buyback to reduce its cash holdings of over $100 billion.
Salesforce.com
Marc Benioff
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Salesforce is down more than 50% from its 2021 peak compared to a 29% decline in the Nasdaq.
Activist-focused hedge fund Starboard Value took a stake in the company last month. While it hasn’t released a typical action plan it recommends co-CEOs Marc Benioff and Bret Taylor follow, it did say it sees potential for the software company to improve its profit margins.
And one way that can happen is via a reduction in its employee count. Since Starboard revealed its stake, Salesforce cut hundreds of jobs.