BlackLine Inc (NASDAQ:BL) has drawn a new wave of investor activism after a San Francisco hedge fund revealed a sizable ownership position late Thursday. Fivespan Partners, led by Managing Partner Dylan Haggart, reported a 5.1% stake in the cloud accounting software company in a Schedule 13D filing, disclosing that it spent about $138.6 million to acquire just over 3 million shares.
The filing makes plain that Fivespan plans to engage with BlackLine's management on governance and corporate strategy. Among the issues the firm said it will press are "board composition" and the company’s "mergers and acquisitions strategy," according to the document.
The disclosure comes on the heels of a separate governance development at BlackLine. Earlier this week the company named Storm Duncan - described as a technology M&A veteran - to its board and to a newly designated Strategic Committee. In the announcement, Lead Independent Director David Henshall said the Strategic Committee will evaluate "strategic transactions involving the Company."
Engaged Capital, which negotiated a cooperation accord with BlackLine that helped facilitate recent board changes, highlighted the need for independent oversight at the software maker. Glenn W. Welling, founder of Engaged Capital, praised Storm Duncan's decades of technology M&A experience, noting that she brings "invaluable experience and independence to the Board and the Strategic Committee."
Fivespan’s move intensifies activist attention at BlackLine amid reports last year that the company had previously spurned a substantial acquisition offer from SAP. Media coverage from October reported that SAP had extended a $66 per share bid the prior spring - a price described as roughly double the company’s recent trading levels - and that SAP was also contemplating a renewed approach.
BlackLine’s chairman and chief executive, Owen Ryan, reiterated management’s stance that the company is executing a clear plan oriented toward accelerating revenue growth. Ryan said on Tuesday that while the company has "further to go," recent progress and a focus on delivering AI capabilities to customers position BlackLine strongly.
In its Schedule 13D filing, Fivespan expressed the view that BlackLine’s securities are undervalued and indicated it may pursue additional changes at the company, including exploring "whether it makes sense for a Fivespan employee to be on the Issuer's board of directors."
Market reaction was modest: BlackLine shares traded up about 1% in early afternoon trading following the filing. Representatives for Fivespan, BlackLine, Engaged Capital, and SAP did not immediately respond to requests for comment.
Context and implications
This new activist disclosure arrives amid heightened attention to how BlackLine manages potential strategic transactions and board oversight. The arrival of a recognized M&A executive on the Strategic Committee and a 5.1% stake held by an activist investor together create a dynamic in which governance, deal strategy, and valuation will be closely watched by shareholders and market participants.