Elliott Management, the feared activist investor that has built up a 4% ownership stake in Twitter and had been pushing for the removal of part-time CEO and co-founder Jack Dorsey, has agreed to stand down on the demand. The ceasefire was agreed as a result of a deal with private equity firm Silver Lake to fund $1 billion of a total $2 billion share buyback programme Twitter has agreed to at Elliott’s request.
Elliott has also been allowed to name two directors to join the Twitter board. They will be Jesse Cohn, an Elliott partners, and Silver Lake co-chief executive Egon Durban. An independent director specialised in artificial intelligence and ‘deep technology’ will also join the board.
Twitter investors were clearly buoyed by the, at least temporary, resolution to Elliott’s pugnacious stance on Dorsey. The company’s share price was up 1% on Monday despite wider stock markets suffering their worst day since the height of the international financial crisis over a decade ago. Yesterday the Twitter share price gained 5.7% compared to the 4.95% rise for the tech-focused Nasdaq.
Mr Dorsey read in a Monday statement:
“Twitter serves the public conversation, and our purpose has never been more important. Silver Lake’s investment in Twitter is a strong vote of confidence in our work and our path forward.”
Elliott Management’s issue with Dorsey is that it is not confident a part-time CEO is enough to steer Twitter’s course forward. The activist investor points to the relatively high turnover rate for senior executive at Twitter as evidence that there is a lack of strong leadership. The company also took issue with Dorsey’s stated plan to spend six months in Africa to explore cryptocurrency opportunities. He has already said he will reconsider whether such an extensive trip is practical in view of his existing commitments.
It does, however, look like a matter of time rather than if Mr Dorsey will finally make way for a new full-time CEO at Twitter. The company announced a new five-person committee of directions, whose job is to “build on the board’s regular evaluation of Twitter’s leadership structure”. Succession planning for the current CEO is said to figure high up in that mandate’s priorities.
Twitter’s new growth target has been set at increasing users by 20% or more per year and improving revenue growth and digital marketing spend share. Advertising revenue growth last year slowed to 14% from 24% in 2018. Just shy of $3 billion was generated by Twitter from advertisers in 2019.
For his part, Dorsey is confident that his CEO role at two companies does not affect his ability to perform each well, commenting late last week at Friday’s Morgan Stanley conference held in San Francisco, where Twitter is based:
“I have enough flexibility in my schedule to focus on the most important things and I have a good sense of what is critical in both companies.”
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