Why Twitter CEO Jack Dorsey Is on the Hot Seat

Nearly 14 years after co-founding the company, Twitter CEO Jack Dorsey finds himself on the hot seat, with activist investor Elliott Management pushing to remove him from the social media giant’s leadership. The news, first reported by Bloomberg on Sunday, didn’t send investors running for the hills on Monday. Instead, Twitter’s stock price shot up 7% to $35.48 per share — higher than the S&P’s 4.6% jump. Even factoring in the overall boost the market enjoyed on Monday following last week’s coronavirus-induced drop, the stock surge suggested that many shareholders agree with Elliott Management’s calls for a CEO change. Elliott Management, which is run by founder Paul Singer, has two chief complaints about Dorsey, according to a person familiar with its plans. First, critics complain that Dorsey is a part-time CEO. By splitting his time running Square, his other multibillion-dollar company, Dorsey isn’t able to devote the attention needed to run Twitter, according to the firm. Second, Elliott faults Dorsey’s performance: The company has failed to innovate at the same rate as its Silicon Valley peers, according to the person familiar with Elliott’s plans, and it has made some dubious choices in recent years, like shuttering Vine — and opening the door for TikTok to take its place in the short-video space. A Twitter representative declined to comment on Elliott’s push to remove Dorsey or its own plans to counteract them. Has Elliott Management, whose stake in Twitter is not know though Axios has estimated it at 5%, raised legitimate concerns about Dorsey’s leadership? “Without a doubt,” said Matt Bilinsky, a tech and media attorney with Weinberg Gonser LLP. “It feeds into many traditional narratives around Twitter and Jack Dorsey, namely — that he’s spread too thin; that a CEO’s job is two jobs in one, and instead, he’s doing half a job; and that he has too many outside interests.” Bilinksy added: “Unless he’s sleeping 45 minutes a night, it’s hard to imagine he’s giving Square and Twitter and all of his outside interests all of the time and attention and mental energy they want.” Not only has Dorsey’s split schedule between Square and Twitter irked Elliott and some investors, certain life choices have also set him apart from the usual CEO. For instance, Dorsey said last year he takes about 75 minutes to walk to work three times a week, and this year he plans on spending up to six months in Africa. Those choices would be easier to overlook if Twitter’s business was thriving. But the company has had a rocky Wall Street performance since Dorsey took over in mid-2015, with the company’s share price hovering near the same level it was at nearly five years ago. And to be clear, Twitter hasn’t gone the way of Tumblr under Dorsey’s watch. Tumblr, after being acquired for more than $1 billion in 2013, was sold last year for less than $20 million to the parent company of WordPress. Just last month, Twitter reported it now had 150 million daily users, and the company posted its first $1 billion sales quarter. But compared to where Twitter was when Dorsey took the reins — and also looking at the performance of other tech giants during that same time frame — investors could be nodding along with Elliott Management’s complaint about how the business is run. Consider Facebook, which went public about 18 months before Twitter. During its first quarter as a publicly traded company, Mark Zuckerberg’s social-media outfit reported about $1.2 billion in revenue. During its most recent quarter, Facebook pulled in $21.1 billion in sales. Twitter’s revenue growth doesn’t come close, with the company going from about $250 million during its first quarter as a public company to $1 billion currently. “If you look at Facebook’s product growth, its M&A strategy, and other aspects of its corporate profile, you can see a lot of wins,” Bilinsky said. “With Twitter, you can’t see many wins, other than it created an interesting platform, got people to buy in and has ridden that wave to billions of dollars. But that’s really it — they haven’t found success stepping out of that lane.” Still, the New York-based Elliott Management would need to convince Twitter’s board — which has three seats opening up this year — that change is needed. This would either lead to a vote pushing Dorsey out, or Dorsey, seeing the writing on the wall, stepping down. Elliott Management, according to Bloomberg, is planning to nominate four potential directors to fill those open seats, and it’s unclear how long the firm has been talking to Twitter board members at this point. Compounding matters for Dorsey is the fact that he doesn’t hold voting control of Twitter, setting him apart from Zuckerberg and other tech execs. A changing of the guard isn’t guaranteed, but Dorsey looks to have a battle on his hands. It’ll make the next annual Twitter shareholder meeting — which is expected in May — a must-watch event.