What happened
Shares of LivePerson (NASDAQ: LPSN) are making huge gains in Wednesday's trading following announcements about a leadership transition at the company. The customer service software specialist's stock was up roughly 35% as of 10:30 a.m. ET, according to data from S&P Global Market Intelligence.
LivePerson published a press release this morning announcing that CEO Robert LoCascio will be departing at the end of this year. The company also announced that its lead independent board director Jill Layfield had assumed the role of board chairman. While some investors may think that the company will have better growth prospects with new leadership at the helm, there's likely another dynamic propelling huge gains for its stock.
So what
While many companies with exposure to the generative artificial intelligence (AI) space have enjoyed explosive stock gains this year, LivePerson has struggled. Even with today's big pop, the company's share price is still down roughly 45% across this year's trading.
With that kind of performance, it's not surprising that there would be some excitement about a leadership change, but there's a good chance the market is interpreting the shakeup as a sign of a bigger structural shift. Reports started emerging in May that the company was looking into selling itself following pressure from the activist investment firm and substantial stakeholder Starboard Value. It's not unusual to see big changes in the composition of a company's management and board teams in the lead-up to being acquired, and investors seem to be betting that a buyout is in the offing.
Now what
With someone new set to step into the CEO role at the beginning of next year, it's possible that LivePerson will welcome an executive with skills and experience to navigate a favorable buyout. The company's share price is still down roughly 92% from its high, and there's a chance an outside suitor could step in to acquire the software specialist at a significant premium.
On the other hand, it's still far from certain that the company will be acquired, and business performance has been relatively soft as of late. The company's first-quarter revenue declined roughly 17% year over year to land at $107.7 million, and there's a risk that its offerings will be overshadowed by other players in the generative AI space.
A potential buyout could be a big win for shareholders, but investors should keep in mind that betting on an acquisition is a high-risk, high-reward play.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends LivePerson. The Motley Fool has a disclosure policy.
