Activist Investor Wants To Show Twitter CEO The Door

Activist Investor Wants To Show Twitter CEO The Door

  • Activist investor and hedge fund Elliott Management is targeting Twitter CEO Jack Dorsey.
  • Dorsey's status as a "part-time" CEO is likely at play.
  • Twitter's management is also guilty of various missteps, according to a leading analyst.

Activist hedge fund investor Elliott Management accumulated a notable stake in Twitter’s stock and one of its top priorities is to show CEO and founder Jack Dorsey the door, according to Bloomberg’s sources.

Part-Time CEO

Dorsey is known to split his time between serving as CEO of Twitter and CEO of Square, a fintech and payments company he also founded. Dorsey also announced last year he wants to spend up to six months a year traveling and working across Africa.

According to Bloomberg’s sources, Elliott Management under the leadership of Paul Singer nominated four directors to Twitter’s board. While details of Singer’s motivations aren’t immediately known, it would be reasonable to assume he has an issue with Dorsey’s leadership decision.

There will be three vacant board seats for investors to vote on this year but Elliott is taking steps to take advantage of potential additional vacancies, the sources told Bloomberg. The activist fund has held private discussions with the Silicon Valley company and talks were described as constructive.

Unlike rival social media company Facebook, Dorsey doesn’t have voting control of the company. This makes Twitter a more vulnerable target for activist investors although it would be an uphill battle.

Product Issues

Shares of Twitter plummeted more than 20% in late October in reaction to a concerning third quarter earnings report. Management attributed the poor results to what it described as “bugs” in the way it targeted ads to customers, according to Bloomberg.

Notable internet analyst Mark Mahaney said on CNBC’s “Squawk Box” that Twitter’s management structure by itself isn’t necessary “dysfunctional.” But there are legitimate product issues and multiple missteps which Dorsey as the CEO may be responsible for.

Mahaney said he had concerns in 2019 that Twitter wasn’t investing enough in R&D and its product and the “glitches” merely confirmed management’s errors. An outside activist investor has plenty of reasons to push for a “full time” management team. 

Other Directors Need To Go
Targeting Dorsey over his part-time status isn’t particularly new. New York University’s Stern School of Business professor Scott Galloway and Twitter shareholder famously wrote an open letter to Twitter executive chairman Mid Kordestani.

The professor said in December 2019 his “primary objective” is to replace Dorsey as CEO. The social media company has an issue in which it can’t take the moral high ground and ask employees to work evenings and weekends when Dorsey himself only “works mornings.”

Replacing Dorsey may be more difficult than many assume because Twitter’s board is stacked with Dorsey loyalists. As such, Galloway argued that the first target for removal may have to be Kordestini.

By Jayson Derrick
Jayson Derrick has been writing professionally about stocks since 2011. He is particularly interested in alternative investments, hedge funds, and activist investing. He is a big fan of NHL hockey and lives in Montreal, Canada with his wife and four year old daughter.

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