Could Twitter be set for a shake-up?
This week, Bloomberg has reported that investment management firm Elliott Management Corp. has purchased a significant stake in Twitter, and now plans to use its holding to push for changes at the company, including, most notably, the replacement of Twitter CEO Jack Dorsey, who's also a co-founder of the platform.
As summarized by Vox:
"Elliott has acquired about $1 billion worth of Twitter shares, which means it has a sizable stake in Twitter, but nothing close to control of the company. Now, the firm wants to use that stake to replace four Twitter board members with its own nominees, who would then presumably pressure Dorsey to leave - or at least stop running Square, the payments company he founded after he first left Twitter."
The crux of Elliott's strategic push here is that Twitter would be better served if it had a CEO solely focused on improving the company's performance, which has fluctuated over the last few years. Dorsey, who is also the CEO of rising payments provider Square, is not able to provide that focus, according to Elliott. If he were replaced with a more businesses-minded, market-aligned leader, Twitter stock would go up, subsequently boosting Elliott's stake.
But there is another narrative that's gaining some traction - which feels less relevant, so much so that I'm hesitant to even mention it. But there is a side note which some outlets are reporting is significant - though I will underline that I do not believe this is the case.
The Guardian has noted that the founder of Elliott Management, billionaire investor Paul Singer, is a "Republican mega-donor", who initially opposed Donald Trump, but has since become a supporter for the sake of unification and moving forward. The suggestion here is that Elliott may be looking to "take over" Twitter in order to use it as a political weapon of some kind. Again, this very much seems like an unlikely angle to this story, but as noted, it's generating some discussion.
As Peter Kafka notes for Vox:
"Singer and his team are motivated by money above all else. They also don’t want to “buy Twitter.” They want the value of the Twitter shares they bought to increase."
Indeed, Elliott Management has a history of this type of activist investing.
Last year, for example, Elliott Management bought up a heap of eBay stock, then used its newly established influence to issue a series of demands te eBay's board. Those demands eventually lead to the resignation of eBay CEO David Wenig, who cited "disagreement with the board" on the platform's direction, while several of the initiatives proposed by Elliott Management have since been implemented at the company.
Elliott has also used similar tactics to force action at AT&T, Samsung, Citrix and many others.
Basically, this is what the Elliott Management does - it sees an opportunity for improvement, then moves to make it happen through investor activism. The political side note seems just that when matched against the company's track record and process.
But it could still mean major changes at Twitter. The platform is often criticized for inaction, for failing to move fast enough, for struggling to adapt and innovate, while other social platforms continue to thrive through new options. Twitter has seemingly improved on this front in more recent times, as its performance data seems to indicate that. But theoretically, there could be more that Twitter could offer, more it could do. Clearly, Elliott Management sees greater potential there.
And really, there should be. Twitter is at the forefront of real-time news, its where the US President shares his opinions, its embedded its place within popular culture and media process. The fact that the company has struggled to grow its user base, despite its global footprint, is somewhat surprising.
Maybe a new CEO could take the platform in a new direction, and maximize its revenue potential. Maybe, it is time for a change.
If that does happen, however, it could mean a major shift for the platform, major strategic changes, new products - Twitter as we know it could see a significant transformation.
And given Elliott Management's track record, I'd be tipping that at least some of its proposed changes will be implemented now that it's turned its attention to the company.
We'll keep you updated on any progress.