Twitter Reaches Deal with Activist Fund That Sought C.E.O.’s Ouster
SAN FRANCISCO — Twitter on Monday said it reached a deal with Elliott Management, an activist investor that had called for ousting the social media company’s chief executive, Jack Dorsey.
As part of the agreement, Twitter sold a $1 billion stake to Silver Lake, the technology-focused investor. It intends to use those funds to partially fund a $2 billion share repurchase program.
Both Elliott Management, which is one of the world’s largest activist investment funds, and Silver Lake, will take seats on Twitter’s board.
“We are excited to partner with Twitter as an investor and a member of the board. Jack is a visionary leader, and a critical force behind Twitter’s ongoing evolution and growth,” Egon Durban, the co-C.E.O. of Silver Lake, said in a statement.
Elliott Management quietly accumulated a sizable stake in Twitter in recent weeks — a bit more than 4 percent, making it one of the company’s largest shareholders — and then announced its presence to Twitter’s board by nominating four new directors on Feb. 21, shortly before the nomination deadline.
The hedge fund met with the chairman of Twitter’s board, Omid Kordestani, and its independent director, Patrick Pichette, the following week to discuss their proposal: oust Mr. Dorsey from his position as chief executive.
Mr. Kordestani and Mr. Pichette advocated a gentler approach, arguing that losing Mr. Dorsey would destabilize the company and that Twitter was finally improving its momentum on product development and revenue.
Silver Lake’s offer to invest, which came after news of Elliott’s position broke, gave Twitter a way out, allowing the company to keep Mr. Dorsey in position without making any other changes among its executive ranks. Twitter’s full board has been meeting over the last week to finalize the terms of the agreement to take on the new investment and board members.
“Silver Lake’s investment in Twitter is a strong vote of confidence in our work and our path forward,” Mr. Dorsey said in a statement. Jesse Cohn, a partner at Elliott Management who will also join Twitter’s board, called the agreement with Twitter “constructive” but hinted that he would continue to push Twitter to turn a stronger profit.
“We invested in Twitter because we see a significant opportunity for value creation at the company. I am looking forward to working with Jack and the board to help contribute to realizing Twitter’s full potential,” Mr. Cohn said.
Mr. Durban and Mr. Cohn will also serve on a board committee to oversee Twitter’s management structure.
It was not the first takeover attempt that Mr. Dorsey had faced in his tenure at Twitter. In 2008, he was fired from the social media company he co-founded, then was brought back in 2015. A year later, Mr. Dorsey withstood an acquisition effort by Salesforce.
Since returning to Twitter five years ago, Mr. Dorsey has remained the chief executive of Square, a payments company. His decision to split his time between the two firms has been controversial and is a key component of Elliott’s effort to push him out of Twitter.
Twitter’s share price has not increased significantly since Mr. Dorsey’s return in 2015, when it was $36. In trading this morning, Twitter shares opened at $31.
Mr. Dorsey spoke about the company’s slow growth during a Morgan Stanley conference on Friday. “Five years ago, we had to do a really hard reset of this company and that takes some time to actually build from,” he said.
The company has also seen frequent executive turnover. In 2018, Twitter’s chief operating officer, Anthony Noto, resigned to become the chief executive of SoFi, a finance start-up. Since then, Twitter has been without a chief operating officer. Mr. Dorsey has focused primarily on engineering and product development, preferring to leave operations to his deputies.
“Twitter seems remarkably similar as it did in 2015,” said Scott Galloway, a professor of marketing at the New York University Stern School of Business and a Twitter investor who called for Mr. Dorsey to step down last year. “The question is: Does this company, at this moment, warrant a full-time C.E.O. who has an office out of headquarters? The answer, I think, is yes.”
Some investors see Mr. Dorsey as an absentee executive who looks after Twitter as a hobby. Mr. Dorsey exacerbated their worries when he announced last year that he would move to Africa for three to six months in 2020. Some Twitter employees, who declined to be named because they were not authorized to speak publicly, defended Mr. Dorsey, saying he is engaged and meets three times per week with Twitter’s executive team.
On Friday, Mr. Dorsey backpedaled on his travel plans during the Morgan Stanley conference, saying he may put off the trip because of the spread of the coronavirus. “Everything happening in the world, particularly with coronavirus, I have to reconsider what’s going on and what that means for me and for our company,” Mr. Dorsey said.
Mr. Dorsey defended his decision to lead two companies at once. “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,” he said. “I have amazing teams working. For the first time in our history at Twitter, it feels like we have so much focus that we can ignore a bunch of the noise.”