Item 1: On August 29, 2022, Glen Kacher, Chief Investment Officer of Light Street Capital Management,
LLC, participated in an interview with CNBC. Portions of the transcript of the interview discussing Zendesk, Inc. are pasted below:
Scott Wapner
Got your letter, its a big thick one today too, in which you say you intend to vote against the companys currently proposed
transaction. Why? Whats the problem with it?
Glen Kacher
Well the important thing here, Scott is were offering investors, public market investors, a chance to participate in the improvement of the financials of
this company. Unfortunately, the current proposal to sell for cash to private equity firms for $1 more than where were trading today is not a great outcome for my investors and I have a fiduciary responsibility to them to make sure we are
getting the most value for our shares. And what weve proposed here is an alternative where we willalong with others invest $2 billion into the company, and then the company will spend $5 billion to buy back more than 50% of the shares in
the company. And then were going to see this through in the long run and public investors that want to stay with the company are going to benefit from running this company much more profitably, tripling the operating margin in the company. And
so, instead of sitting back, letting private equity were big fans of private equity, they do a great job for their investors. But instead of letting them buy the company for cash, cut expenses, run the company much more profitably, get
all the benefit for their investors and have the public market investors not benefit, were going to do something, were going to run that playbook, but were going to run it in the public market.
Scott Wapner
It sounds like you just dont
want private equity to own this company. I mean, you know, you said you like private equity.
Glen Kacher
No, we want to own it. Were putting our money where our mouth is.
Scott Wapner
I hear you, I know you say you like
private equity, but youve literally just picked apart the private equity model. Right?
Glen Kacher
We want to run their model. We just want the public market investor to get a chance to benefit from it. I think were doing the really fair thing for the
public market shareholders.
Scott Wapner
You
also want to get rid of the CEO and expand the board, right?
Glen Kacher
We have a ton of respect for Mikkel. Mikkel built this company from 2007 till now, started in Copenhagen, bringing it into to the US, I mean, its an
American dream success story, right? And its an incredible company. Thats why we own shares in it. Thats why we want to continue to own shares in this company. And thats why we think the public investors should, but we have a
little bit different plan. We want to see the company run much more profitably. Instead of edging up of the cash flow margin or operating margin of the company, one and a half percentage points a year, we want to triple it. We want to take the
company, show how profitable it is these well-run software-as-a-service enterprise software companies have incredibly stable customer bases. And they provide an incredible amount of value to their customers. The customers dont want to
leave, they want to continue to see great products expand and get better. And so we want to keep doing that and Mikkel has done an incredible job for 15 years building an incredible franchise, but we do want to see it run much more profitably. And
thats the plan we want to go forward with.
Scott Wapner
Well yeah, I know you talk about you want the current shareholders or public investors to reap the rewards of what you think you can deliver here. Im
wondering what you make of the fact that it looks to us as though from recent 13F filings that Jana is no longer a shareholder. Third Point, it looks to me got out recently, at least from their most recent filing. What do you make of that?
Glen Kacher
Well, you know, I cant speak
for them. But what I can say is I think theres investors that have lost a lot of confidence here. This is a company that had a buyout offer at 127-132 dollars, unsolicited, from including one of the firms here thats trying to buy it now
for 77 and a half.
At the time, Zendesk turned down that offer so that they could pursue a very unpopular, or unpopular with the shareholders,
acquisition of Momentive, that transaction, it was well known amongst public shareholders that that no one wanted them to do this deal. And ultimately, the management team lost the shareholder vote 90 to 10 against the transaction to buy Momentive.
They also missed the opportunity to sell the company at $130 and now they turn around and think its a great idea to sell the company and $77.50 in cash and leave the public market shareholder just standing on the sidelines. Thats not
good with us. Thats not good for my investors. And thats not doing the best for this company thats not taking this company to the place that it needs to go over the next 3, 5, 10 years. And weve laid out an amazing plan in
our letter as to explaining what work we would do going forward and also this transaction that were proposing as an alternative to keep the company public to buy back over half the shares, and you know, really run the private equity playbook
in the public market.
Scott Wapner
Would you
support a deal at a higher price? Or you just dont like this particular pairing, as much as anything else?
Glen Kacher
Well, I think Ive been pretty public in saying what I think this company can be worth in the future. And its multiples of todays current
price. So, I dont want to say what we would or wouldnt do under you know, unnamed scenarios. But what I will say I think this company is worth a heck of a lot more than it is today. And we want weve laid out a plan to get
there. And so, in that case, you know, thats what we want to do, we want other shareholders to join us in that plan and to vote for our proposal, and instead of selling this company for basically $1 more than its trading today.
Scott Wapner
Let me ask you, Id hate to
miss the opportunity to talk to you about where we started our program with you know whats going to happen for NASDAQ technology stocks, really, I mean, you are a well-known tech investoras much as anybody. What are your thoughts your
what is your outlook, given this sort of new environment that we find ourselves in?
Glen Kacher
Well, you know, this is a great example, Zendesk is in some ways, a great example of whats going on. Incredible company, incredible customer base,
incredible products. And you know, its lost a lot of its value. And its still all those things. And I look at the you know, not only Zendesk, but the whole sector and say, this seems like you know, an incredible buying opportunity for
our industry. And so, were incredibly positive and we like the portfolio that we have built to come out of the current environment that were in right now, were kind of bouncing along the bottom here and expect that ultimately when
investors decide to come back and take more positions in the sector, that were in the right stocks that are going to benefit greatest from that re-rating.
Scott Wapner
Doesnt sound to me like you
think were going back to the lows of mid-June for NASDAQ, if you suggest that this is a great buying opportunity.
Glen Kacher
Yeah, thats not my expectation, but you know, everyones entitled to their opinion about where were headed. And we really look forward and see
brighter days coming. You know, Ive been through this, you know, I started in this career in 1993 been through several major corrections, including, you know, the dot-com debacle and through the global financial crisis, and I look back at
those two big corrections and think what were going through right now is something of a blip.