Irenic’s Bold Move: Shaking Up Workiva’s Future

Have you ever wondered what happens when a company with a stellar product struggles to turn a profit? It’s like owning a Ferrari but never figuring out how to shift gears properly. That’s the story unfolding at Workiva, a leader in cloud-based reporting solutions, now under the spotlight of activist investor Irenic Capital. With a bold 2% stake, Irenic is shaking things up, demanding board seats and strategic overhauls that could redefine the company’s trajectory.

Why Irenic’s Move Matters

Irenic Capital, founded by former heavyweights from Elliott and Indaba, isn’t just another investor throwing money around. They’re strategic activists with a knack for spotting undervalued gems and pushing for change. Their recent move on Workiva, announced on September 29, signals a belief that this cloud software provider is punching below its weight. But what’s driving this push, and why should investors care? Let’s dive into the details.

Workiva’s Market Strength: A Hidden Gem

Workiva’s platform is a powerhouse. It integrates financial reporting, ESG (environmental, social, and governance), and GRC (governance, risk, and compliance) into a seamless, cloud-based solution. Imagine a tool that connects data from countless systems—think ERP, HCM, CRM—and transforms it into audit-ready reports. It’s no wonder 95% of the Fortune 100 and 89% of the Fortune 500 rely on Workiva, with a jaw-dropping 97% customer retention rate.

Workiva’s platform is a market leader, streamlining complex reporting for the world’s biggest companies.

– Industry analyst

With revenue growth humming along in the mid-teens, Workiva is on track to hit $1 billion in sales by 2026. That’s the good news. The bad news? Despite a decade in the public markets, the company hasn’t turned a profit. Its stock trades at a 25% discount compared to peers like Workday or ServiceNow, a gap that Irenic believes is fixable.

The Governance Problem: A Founder’s Grip

Here’s where things get sticky. Workiva operates like a private fiefdom, controlled by its three founders through a dual-class share structure. This setup gives them 44% of the voting power, despite owning far less of the company’s equity. It’s like letting a small group of chefs dictate the entire restaurant menu, even when the diners are clamoring for change.

The board is another sore spot. Five of the seven directors have been in place since the 2014 IPO, and their experience feels outdated for a fast-moving SaaS company. A staggered board—where only a few seats come up for election each year—makes it tough for shareholders to push for fresh perspectives. Irenic’s calling for a governance overhaul, including collapsing the dual-class structure and adding new blood, like their own executive, Krishna Korupolu.

• Collapse the dual-class share structure for fairer voting.
• De-stagger the board to allow quicker changes.
• Add directors with relevant SaaS and financial expertise.

Is this a pipe dream? Maybe not. The founders—Matthew Rizai, Jeffrey Trom, and Martin Vanderploeg—aren’t as unified as they once were. Rizai stepped down as CEO in 2018, and Trom scaled back his role by 2023. With all three over 65 and selling shares, Irenic might find an opening to sway at least one of them.

Operational Overhaul: Trimming the Fat

Workiva’s business is top-notch, but its operations? Not so much. The company’s spending on sales and marketing is a whopping 43% of revenue, compared to 31% for its peers. That’s like pouring half your paycheck into advertising a lemonade stand. The result? A projected 7% operating margin for 2025, despite 80% gross margins.

Irenic argues Workiva could hit the Rule of 40—where revenue growth plus operating margins exceed 40—by 2027. How? By streamlining sales efforts and leveraging the company’s strong pricing power. With 18% revenue growth, cutting just a few percentage points of inefficient spending could transform profitability.

Smart cost-cutting could unlock Workiva’s profit potential without sacrificing growth.

In my experience, SaaS companies often overspend to chase marginal growth. Workiva’s high retention rate and blue-chip clients mean it doesn’t need to burn cash to keep growing. A leaner approach could make it a standout in the sector.

The Big Picture: A Potential Sale?

If governance and operational fixes don’t pan out, Irenic’s pushing for a strategic review, including a possible sale. Workiva’s market leadership in SEC filing services—which accounts for 40% of revenue—makes it a juicy target. In 2022, private equity firms reportedly circled the company, and strategic buyers like Intuit, Salesforce, or even stock exchanges could see big synergies.

Comparable deals, like Smartsheet’s sale at 7x revenue or AspenTech’s at 14x, suggest Workiva could fetch $7 billion to $8 billion based on its projected $1 billion revenue by 2026. That’s a 40-60% upside from its current $4.92 billion market cap. Strategic buyers might pay even more, given the potential for cost savings and cross-selling opportunities.

1. Private Equity Interest: Firms like Thoma Bravo could bid 7-8x revenue.
2. Strategic Buyers: Companies like Salesforce or Oracle could pay a premium.
3. Synergies: Integrating Workiva’s platform could boost acquirers’ offerings.

But here’s the catch: the founders’ voting power means nothing happens without their buy-in. Irenic’s banking on at least one founder—likely Rizai or Trom—seeing the value in a sale. If not, they’re ready to escalate, possibly nominating directors to force the issue.

Can Irenic Pull It Off?

Activist campaigns against founder-controlled companies are like climbing Everest in flip-flops—tough, but not impossible. Irenic’s advantage lies in Workiva’s fractured founder dynamic. Rizai’s exit and Trom’s reduced role suggest they might be open to a lucrative deal. Plus, the founders’ share sales signal they’re not wedded to control forever.

Founder Voting Power:
  Matthew Rizai: 24.6%
  Martin Vanderploeg: 10.6%
  Jeffrey Trom: 9.2%

Irenic’s collaborative approach—working with management rather than against it—could also help. They’re not storming the castle with pitchforks; they’re offering a roadmap to unlock value. If they can align with one founder, the dominoes could fall.

What’s Next for Workiva?

The ball’s in Workiva’s court. Will the board embrace Irenic’s vision for governance reform and operational efficiency? Or will they dig in, forcing a showdown? My take: the pressure’s on. With a stock trading at a discount and a business ripe for optimization, ignoring Irenic could alienate other shareholders.

Investors should watch closely. If Irenic secures board seats or sparks a sale, the upside could be significant. Even without a sale, operational improvements could narrow the valuation gap with peers. Either way, Workiva’s days of coasting are over.

The next few months will be pivotal for Workiva’s future—change is coming, one way or another.

– Investment strategist

Perhaps the most intriguing aspect is how this saga reflects broader trends in shareholder activism. As more activists target undervalued tech firms, companies like Workiva can’t hide behind founder control forever. Irenic’s move could be a wake-up call for the entire SaaS sector.

Why This Matters to Investors

For investors, Irenic’s campaign is a signal to reassess Workiva. The company’s fundamentals are rock-solid, but its governance and cost structure are holding it back. If Irenic’s push succeeds, the stock could rally. If it stalls, the discount to peers might persist.

Here’s my two cents: Workiva’s platform is a rare asset in a growing market. With the right tweaks, it could be a cash cow. Whether through a sale or internal fixes, the potential for value creation is huge. Keep an eye on the boardroom—it’s where the real action is.

So, what do you think? Is Irenic’s bold bet a game-changer for Workiva, or will the founders hold firm? One thing’s clear: this isn’t just another activist campaign—it’s a high-stakes chess match with billions on the line.