New Relic Inc, the U.S. business software company targeted by activist hedge fund Jana Partners, is preparing to explore a potential sale following interest from private equity firms, sources familiar with the matter told Reuters.
New Relic is in talks to hire financial advisers to explore options that would include a sale, the sources said, cautioning that no deal is certain. The sources requested anonymity because the matter is confidential.
A spokesperson for New Relic declined to comment.
New Relic shares jumped on the news and ended trading on Wednesday up 17% at $61.28, giving the company a market value of $4.1 billion.
The San Francisco-based company develops cloud-based software to help websites and application owners track the performance of their services. Founded in 2008, the company listed in the stock market in 2014.
In recent years, New Relic’s growth has slowed as it tries to compete against other Application Performance Monitoring (APM) vendors such as Dynatrace and Datadog. It reported 14,800 active customer accounts in the most recent quarter, down from 15,400 in June 2020.
New Relic generated revenue of $786 million in fiscal year 2022, up 18% year-over-year, while its loss widened to $229 million from $171 million. It shares have lost half of its value since November 2021.
Last month, New Relic appointed Kevin Galligan, a partner at Jana Partners, to its board as part of a cooperation agreement, and Jana has increased their stake in the company to 5.3%, according to a filing.
Jana Partners is known for pushing for a sale of the companies it takes a stake in. Zendesk Inc, another Jana target, agreed to be sold last month for $10.2 billion to a consortium of private equity firms led by Hellman & Friedman and Permira.
