Were there not a deadly coronavirus spreading across the globe, I suspect more of us might be talking about a different disruption to life as we know it: the potential end of Jack Dorsey’s latest tenure as the CEO of Twitter.
Dorsey cofounded Twitter, was its first CEO, and returned in 2015 as its fourth. Throughout that time, he has been one of the more unconventional leaders in business. As recounted in Nick Bilton’s history of the company’s early years, Hatching Twitter, Dorsey was forced out of the job initially because he spent too much time doing yoga and attending fashion design classes.
When
he returned as CEO in 2015, replacing Dick Costolo, it was just as improbable. The board had said initially it would consider only a full-time employee to run the company. By that point Dorsey had founded a second successful business, the payments company Square, and was leading it as CEO. But after a search, Twitter’s board — of which Dorsey was then chairman — settled on him anyway, and he has led it ever since.
It has been a rocky tenure. For most of Dorsey’s time as CEO, Twitter has been unprofitable. It has not offered much product innovation, nor has it acquired its way to significant user growth. Like other tech platforms, it was exploited productively by Russia during the 2016 election. The company has made many, many promises about what it might do eventually, starting with its unyielding problem with users harassing one another, and then mostly under-delivered.
Then there is the question of stock price — the metric that, for good and bad, all CEOs are ultimately held accountable to. Since he returned, Twitter shares are down 6.2 percent,
Bloomberg reported last week, while Facebook’s are up 121 percent.
(Also Dorsey plans to decamp to somewhere in Africa at some point this year, for an unspecified length of time. Lot going on with this man!)
It is not difficult, in short, to make a case against Jack Dorsey, and now someone has. The activist investor Elliott Management Corp. has taken a roughly 4 percent stake in Twitter and has now put forth four nominees to the company’s board, with the goal of replacing Dorsey as CEO.
In Axios, Dan Primack argues Elliott’s case:
- Dorsey only can devote part of his attention to Twitter, given that he also runs payments company Square (in which he has a larger financial interest). And this is only exacerbated by
Dorsey’s plans to spend much of 2020 in Africa, to better understand the continent’s fintech revolution (i.e., something that is much more pertinent to Square than to Twitter).
- Twitter under Dorsey has experienced consistent executive turnover and has repeatedly dropped the product innovation ball (particularly in mothballing Vine, which was TikTok before TikTok).
What is this Elliott Management Corp.? It’s a hedge fund led by the billionaire Paul Singer. Sheelah Kolhatkar profiled him
in the New Yorker in 2018. Kolhatkar described Singer as …
one of the most powerful, and most unyielding,
investors in the world. Singer, who is seventy-three, with a trim white beard and oval spectacles, is deeply involved in everything Elliott does. The firm has many kinds of investments, but Singer is best known as an “activist” investor, using his fund’s resources—about thirty-five billion dollars—to buy stock in companies in which it detects weaknesses. Elliott then pressures the company to make changes to its business, with the goal of improving the stock price. Elliott’s executives say that most of their investment campaigns proceed without significant conflict, but a noticeable number seem to end up mired in drama. A signature Elliott tactic is the release of a letter harshly criticizing the target company’s C.E.O., which is often followed by the executive’s resignation or the sale of the company. One of Singer’s few unsuccessful campaigns, to block a merger within Samsung, eventually led to the impeachment and imprisonment of the South Korean President after Singer’s opponents became so desperate to fend off his attack that they allegedly began bribing government officials. From the outside, it can seem as if Elliott is causing the drama, but the firm argues that it simply identifies preëxisting problems and acts as a check on the system.
Activist investing is controversial: critics believe that it can force companies to lay off workers and curtail investment in new products in favor of schemes that boost short-term profits, while proponents view it as a useful source of pressure on C.E.O.s to reduce waste and manage their companies more effectively. In the press, Singer and similar investors have been compared to vultures, wolves, and hyenas. Bloomberg has called Singer “aggressive, tenacious and litigious to a fault,” anointing him “The World’s Most Feared Investor.” Singer’s ventures have been consistently successful, with average annual returns of almost fourteen per cent, making him and his employees enormously wealthy. The mere news that Elliott has invested in a company often causes its stock price to go up—creating even more wealth for Elliott. Singer has been deploying his riches in Republican politics, where he is one of the G.O.P.’s top donors and a powerful influence on the Party and its President. According to those who know Singer, in politics, as in business, he is intent on doing whatever it takes to win.
To reiterate: the world’s most feared investor now has Jack Dorsey in his sights. What happens next?
In the short term,
employees and allies have rallied around Dorsey. On Monday, internal pro-Dorsey discussions bubbled onto Twitter itself, where a few dozen employees tweeted with the hashtag #WeBackJack. Tesla CEO Elon Musk, who recently appeared via FaceTime at Twitter’s annual employee conference, tweeted his support as well, posting that Dorsey has “a good [heart emoji].”
An Elliott-led ejection of a public-company CEO is not a pretty sight. (One CEO deposed by Elliott
memorably commented that “when he began to research Elliott online, the experience was like ‘Googling this thing on your arm and it says, “You’re going to die.”’”) If you’re a public investor and you bought shares of Snap in its IPO, the experience might lead you to object to dual-class stock in future IPOs. But if you’re a tech founder and you watch Elliott wage an ugly proxy fight to get rid of Jack Dorsey for the venial sin of working half-days at his company, the experience might lead you to insist on dual-class stock in your own IPO. Twitter is a little bad, and its founder is in the crosshairs of big scary Elliott; Snap is worse, and its founders are fine because they had the foresight to prevent this. The whole point of dual-class stock is to protect tech founders from Elliott so that they can follow their bliss in a long-term visionary way!
But the most interesting question is the least answerable question, and that’s what happens in the medium term. Which is to say: can Dorsey survive this? The experience of previous CEOs whom Singer has put through the ringer suggests that the answer might well be no. The case against Twitter leadership over the past decade is thick and damning, and promising it will all get better in the future won’t play as well with a hedge fund
as it has on the podcast circuit.
At the same time, it’s at least a little curious that Singer is making his move
now, when Twitter has become consistently profitable, returned to user growth, and
finally started to pick up the pace of product development. It’s still easy to make the case that Twitter can and should be much bigger and better than it is — it just feels a bit rude to make that case when the company finally, and to the surprise of many of those of us who have covered it for the past decade, begins to turn it around.
But business ain’t beanbag, and “good enough” clearly isn’t cutting it for Paul Singer. Unless something changes dramatically, it would appear that Jack Dorsey is in for the fight of his life.
