Activist Irenic builds a stake in Workiva, hoping to gain two board seats

Activist Investor Irenic Seeks Board Influence at Workiva, Signaling Potential Strategic Changes

Imagine your favorite sports team has all-star players, but they just can’t seem to win the big game. That’s kind of what’s happening with Workiva—a company that helps big businesses organize their data in the cloud, but hasn’t found a way to turn all that strength into real profits. Let’s break down why this matters for investors and what could come next.

What Is Workiva and Why Should Investors Care?

Workiva makes software that helps companies keep track of their financial reports, follow rules, and manage important data safely. It’s like a super-organized digital notebook for giant companies. Most of the biggest companies in America use Workiva, and it’s really good at keeping customers happy—about 97% of them stick around each year.

But here’s the catch: even though Workiva is growing and has a long list of blue-chip clients, it still isn’t making a profit. That’s unusual for a company of its size, especially since it’s been public for over a decade. For investors, that can be a red flag, because owning profitable companies is one of the best ways to grow your money over time.

Bulls: Reasons to Be Optimistic

  • Huge Customer Base: 95% of Fortune 100 companies use Workiva, showing its software is trusted by the biggest players.
  • Sticky Revenue: With a 97% customer retention rate, Workiva’s services are hard to replace, which means steady income.
  • Growth Potential: Workiva is aiming for $1 billion in revenue by 2026 and keeps growing at about 18% per year.
  • Strong Industry Trends: More companies want secure, cloud-based reporting—Workiva is right in the middle of this trend.
  • Possible Buyout: Other big tech companies or investment firms might want to buy Workiva, which could mean a higher stock price for investors.

Bears: Reasons to Be Cautious

  • No Profits Yet: Even after years of growth, Workiva still isn’t making money. This can scare off new investors.
  • High Spending: Workiva spends a lot on sales and marketing—43% of its revenue, compared to 31% for similar companies. That hurts its bottom line.
  • Governance Issues: The company is run by its founders, who have special shares that give them extra voting power. This makes it hard for outsiders to push for changes.
  • Board Concerns: Many board members have been there since the IPO in 2014, and there’s not much new experience coming in.
  • Discounted Stock Price: Because of these issues, Workiva trades at a 25% discount compared to similar software companies like Workday and ServiceNow.
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The Activist Investor: Irenic Capital Steps In

Irenic Capital, an investment group, recently bought about 2% of Workiva. They want the company to:

  • Spend money more wisely (especially on sales and marketing)
  • Look into selling the company or making big changes to its leadership
  • End the special voting rights for founders and refresh the board with new members

This isn’t just talk—activist investors like Irenic have helped push for big changes at other companies, sometimes leading to higher stock prices. According to Harvard Law School’s Forum on Corporate Governance, companies that respond well to activist investors often see better results for shareholders.

What’s Next? Possible Outcomes

  • Better Efficiency: If Workiva listens to Irenic and cuts back on spending, profits could finally show up—good news for the stock.
  • Big Sale: If changes don’t happen, there’s a chance Workiva could be sold to a bigger tech company or private equity firm. Past deals in this space have gone for 7–14 times revenue, which could mean a 40–60% jump in Workiva’s stock if it’s sold at the right price.
  • Founder Resistance: The founders still control a lot of the voting power, so any big changes need their approval. But they’ve been stepping back, and some have even sold shares, which could open the door for change.

Investor Takeaway

  • Watch for governance changes: If Workiva refreshes its board or ends founder control, that could boost the stock.
  • Keep an eye on profits: Look for signs that Workiva is spending more efficiently and moving toward profitability.
  • Follow activist investor moves: Irenic’s involvement could lead to more news or even a buyout offer—stay tuned for updates.
  • Compare to peers: Check how Workiva trades versus other cloud software companies. A narrowing discount could mean upside.
  • Remember the risks: If founders resist change, progress could stall, and the stock may stay cheap for a while.

In short, Workiva is a strong company with big potential, but it needs to fix some problems before investors can really cheer. Stay alert for changes—sometimes, a shake-up is exactly what a team needs to start winning.

For the full original report, see CNBC

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