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

Company: Workiva (WK)

Business: Workiva is a provider of cloud-based reporting solutions that are designed to solve financial and non-financial business challenges at the intersection of data, process and people. The company offers its unified software-as-a-service, or SaaS, platform that brings customers’ financial reporting; environmental, social and governance (ESG); and governance, risk and compliance (GRC) together in a controlled, secure, audit-ready platform. The Workiva platform is multi-tenant cloud software deployed in multiple regions worldwide for assured integrated reporting. The company’s platform is built primarily on Amazon Web Services and is composed of both proprietary and open-source technologies. Its Workiva platform helps customers by connecting and transforming data from hundreds of enterprise resource planning, human capital management, and customer relationship management systems, as well as other third-party cloud and on-premises applications.

Stock Market Value: $4.92 billion ($87.46 per share)

Activist: Irenic Capital Management

Ownership: ~2.0%

Average Cost: n/a

Activist Commentary: Irenic Capital was founded in October 2021 by Adam Katz, a former portfolio manager at Elliott Investment Management, and Andy Dodge, a former investment partner at Indaba Capital Management. Irenic invests in public companies and works collaboratively with firm leadership. Their activism has thus far focused on strategic activism, recommending spinoffs and sales of businesses.

What’s happening

On Sept. 29, Irenic announced that they have taken a roughly 2% position in Workiva and are calling on the company to improve its operating efficiency, review strategic alternatives with fresh board oversight, including a potential sale of the company, and improve corporate governance practices, including collapsing its dual-class share structure. Irenic also called on the company to add two new board members, including Irenic executive Krishna Korupolu, to the board, and noted that they have not ruled out nominating directors if the two sides can’t reach an agreement.

Behind the scenes

Workiva is the leading provider of cloud-based reporting solutions, integrating financial reporting, sustainability management, and governance, risk, and compliance, into a sharable, data-integrated, and audit-ready environment. Over 40% of the company’s revenue is derived from its SEC filing service, which simplifies regulatory filings and other disclosures for public companies. This is a great business that serves some of the world’s largest enterprises, with 95% of the Fortune 100, 89% of the Fortune 500 and 85% of the Fortune 1000 using its platform, supported by an approximately 97% customer retention rate that has enabled consistent mid-teens revenue growth.

But the problem for Workiva lies not in the quality of its business, but rather its lack of profitability. Despite scaling toward more than $1 billion in revenue by 2026 and over 10 years operating in the public markets, Workiva is yet to generate a profit. As a result, Workiva shares currently trade at a roughly 25% discount to application software rivals like Workday and ServiceNow.

This discount and operational challenges have drawn the attention of Irenic Capital, who has disclosed an approximately 2% position in the company and issued a presentation to the Workiva board calling for governance enhancements, operational changes and a review of strategic alternatives.

Governance is a real issue at Workiva and an obvious reason for the discounted stock price. Workiva is still run like a private company with its three founders controlling the company through the dual share class structure. This has led to a staggered board with little relevant experience and five of seven directors serving since the 2014 IPO.

Irenic would like to see the dual class share structure collapsed and the board de-staggered and reconstituted with qualified directors including Irenic executive Krishna Korupolu. In the world of shareholder activism, this is generally tantamount to asking a country like North Korea to convert to a democracy, but Irenic’s prospects are not hopeless here (more on that later).

Operationally, you get what you would expect from a founder-controlled company — an extremely bloated SG&A. Much of the margin pressure can be attributed to inefficiencies in the company’s operating model, particularly within its sales force, as sales and marketing currently occupy 43% of revenue compared to 31% on average for peers. This has produced an estimated operating margin for calendar year 2025 of 7%, despite having 80% gross profit margins. SaaS companies of this caliber should be able to meet “Rule of 40” targets (operating margins plus revenue growth equal or exceeding 40), a level of…