Whetstone Sells All Freshworks Shares

Freshworks (NASDAQ:FRSH) was fully liquidated from Whetstone Capital Advisors, LLC’s portfolio per a Nov. 14, SEC filing,. The position previously accounted for $7.3 million at the end of the second quarter.

What happened

According to a filing with the U.S. Securities and Exchange Commission dated Nov. 14, Whetstone Capital Advisors, LLC sold all of its Freshworks shares. The transaction involved selling 492,234 shares, valued at about $7.3 million at the end of June.

What else to know

• Whetstone Capital Advisors, LLC sold out of Freshworks; the position now represents n/a of 13F AUM
• Top holdings after the filing:
  • NYSE:NET: $66.78 million (18.5% of AUM)
  • NASDAQ:DAVE: $55.17 million (15.3% of AUM)
  • NASDAQ:GOOGL/NASDAQ: GOOG: $32.18 million (8.9% of AUM)
  • NASDAQ:OPRX: $30.92 million (8.6% of AUM)
  • NASDAQ:AMZN: $20.47 million (5.7% of AUM)
• As of Nov. 14, Freshworks' shares were priced at $12.11, down 25.8% over the past year, underperforming the S&P 500's total return by 40.5 percentage points

Company Overview

Company Snapshot

Freshworks Inc. offers cloud-based software-as-a-service (SaaS) solutions for customer engagement, IT service management, and sales automation. It serves a diverse customer base ranging from small businesses to large enterprises worldwide.

Foolish take

Whetstone Capital Advisors only added the Freshworks position in the second quarter before completely selling out its shares in the third quarter. That indicates the investment firm quickly realized it wasn't a core holding.

Freshworks reported third-quarter results earlier this month. Revenue grew 15% year over year to $215.1 million. It reported an operating loss under generally accepted accounting principles of $7.5 million, although that's narrower than last year's $38.9 million loss.

Management also showed non-GAAP operating income of $45.2 million, nearly double the year-ago figure of $24 million. However, the figure adds back certain items, including large amounts for stock-based compensation.

While investors sent the stock price higher following the 2021 initial public offering (IPO) at $36, it quickly fell out of favor. The shares currently trade at less than one-third the IPO price. Freshworks has been pushing AI products, but the market seems to have doubts about its prospects, given the stock return.

Glossary

13F reportable assets: Assets that institutional investment managers must report quarterly to the SEC, showing their holdings in U.S. securities.
Assets under management (AUM): The total market value of investments managed on behalf of clients by a fund or firm.
Net position change: The total dollar value difference in a fund's holdings of a particular security after buying or selling.
Fully liquidated: When a fund or investor sells all holdings of a particular security, leaving a zero balance.
Stake: The amount of ownership or shares held in a company by an investor or fund.
Quarterly average pricing: The average price of a security over a specific quarter, often used for reporting or valuation.
TTM: The 12-month period ending with the most recent quarterly report.
Cloud-based software-as-a-service (SaaS): Software delivered over the internet and accessed via subscription, rather than installed locally.

Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Cloudflare. The Motley Fool has a disclosure policy.