Is the End of Twitter Near?
The Twitter Board Dysfunction Dilemma for Elon and Jack
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In the tumult following Elon Musk’s bid to buy Twitter the only voice we haven’t heard from has been the company’s co-founder, Jack Dorsey—until now. It’s not shocking that Billionaires would huddle together, either.
Former Twitter CEO Jack Dorsey criticized the company’s board in a series of tweets on Sunday. I find it somewhat amusing, from the takeover bid to the poison pill approach, to the uncertain future of Twitter.
Jack Dorsey who has 6.2 million Fans on Twitter himself, plans to leave the board once his term expires to focus on Square (and Bitcoin stuff).
Apparently the Twitter Board does not own many Twitter shares, and it’s somewhat puzzling what they are doing during this period. As you likely already know, the board is currently considering a $43 billion bid from Tesla CEO Elon Musk to buy the company and take it private.
I never imagined I’d follow Twitter’s fate on Twitter, but such is the fate of Web 2.0 today - Twitter and Facebook as business models have uncertain futures. The future only can come when the past starts to burn. There are some red flags at Twitter in 2022.
Jack on the Twitter Board
Dorsey criticized the board in response to a post in which a user quipped that the company’s “early beginning” was “mired in plots and coups” among its founding executives.
“It’s consistently been the dysfunction of the company,” Dorsey said.
The comment seems to indicate Jack is with Elon Musk and is super weird since Jack was Twitter’s CEO not so long ago.
Jack it appears left a sinking ship. Dorsey still sits on Twitter’s board but has planned to leave once his term expires at the 2022 meeting of shareholders, which is scheduled for late May.
All this drama is not good for shareholder confidence in the company.
In February, 2022, Twitter reported earnings for the fourth quarter on that missed analyst estimates on earnings, revenue and user growth. So what’s going on?
Responding to another Twitter user describing the “plots and coups” that played out early on in the history of Twitter’s board, Dorsey replied, “it’s consistently been the dysfunction of the company.” How do you grow a company that has a dysfunctional board? No wonder Elon wants to take it private.
Is this the Beginning of the Death of Twitter?
Later, when asked by another user if he was “allowed to say this” about Twitter’s board, Dorsey replied “no.” Clearly there is a history of in-fighting at Twitter. Just as there has been at Facebook, which has suffered the biggest talent exodus of the pandemic in BigTech.
However, it’s just as interesting that Dorsey felt the need to clarify that, “I wasn’t pushed out. I left.” It’s clear that Dorsey’s heart is now with Bitcoin, as Square acquired Tidal it turned into Block. It’s all very Silicon Valley-esque. Tycoons fighting over mindshare about Twitter, on twitter.
The startup rhetoric is also the usual clichés. Earlier, he responded to another tweet in the same thread. It quoted venture capitalist Fred Destin citing what he called a “Silicon Valley proverb”: “Good boards don’t create good companies, but a bad board will kill a company every time.”
It’s all becoming rather public. On Friday, Twitter’s board adopted a so-called poison pill — a limited duration shareholder rights plan that would allow shareholders to buy stock at a discount if any one person or entity amasses at least 15% of outstanding common stock without the board’s prior approval. Musk recently revealed a more than 9% stake in the company before his takeover bid. That’s a weird tactic, considering the Board does not represent much of the percentage of stock shares i.e. the actual shareholders.
Jack came back, but not really. Dorsey, who also co-founded the company, served an earlier stint as its CEO but was fired from the role in 2008 and replaced with another one of his co-founders. He returned to lead the company in 2015. Following Twitter is getting a bit ridiculous in 2022.
How is the Twitter Board Aligned with Shareholders?
Musk tweeted Saturday that, with Dorsey leaving the board, “the Twitter board collectively owns almost no shares! Objectively, their economic interests are simply not aligned with shareholders.”
I think that argument makes a lot of sense.
Dorsey recently noted that he “ended up with very little of the company” because it took many of his shares when he was fired in 2008. I would not consider 2% that little. It is worth noting that Dorsey, a member of the Twitter Board of Directors, owns 2.2% company stake. Twitter was founded in 2006. That he still owns two percent of this company even after 16 years is actually somewhat impressive!
He said he also gave 1% of the company back to employees in 2015. Still, Dorsey remains the largest insider stakeholder of the company after Musk’s 9.1%, with about 2.25% of shares, according to FactSet.
There is also a lack of transparency about how else owns how much of Twitter?
After that, Silver Lake, whose CEO Egon Durban is a Twitter board member, owns 0.26%, according to FactSet. The Vanguard Group is the largest institutional shareholder, with a 10.29% stake in the company, according to FactSet. It’s not clear how much Saudi Prince Talal owns of it, though it could be a lot since he seems to be among those opposing Elon Musk.
The company’s stagnant stock price reflects what many believe—while the service has captured the public’s attention it has yet to optimize its profit-making potential and overall reach. Twitter missed the opportunity to do Ads well and might have a declining intrinsic value. However collectively, Twitter is still symbolic of the speed of breaking news, where many journalists still use the platform. But in many ways it is a dying breed of platform.
In the April 13 Securities and Exchange Commission filing documenting his bid, Musk confirmed, “I don’t have confidence in [Twitter’s current] management.” This implies he does not get along with Twitter’s new CEO, Parag Agrawal. So Twitter’s dysfunction is now becoming public knowledge. Just as Facebook’s dysfunction due to the amount of control Mark Zuckerberg has is terribly dysfunctional, not only internally but to Facebook’s role in society.
Musk is no longer the largest Twitter shareholder, that title goes to the Vanguard Group, which now owns 10.3% of the company (Musk holds 9.2%) worth roughly $3.78 billion. There could be a bidding war for Twitter soon and its getting ugly.
Musk’s bid has kicked off speculation that other entities, such as private equity firm Thoma Bravo and others, may enter the fray and start a bidding war. This could ultimately spoil Twitter’s reputation as the leftovers of some Web 2.0 era of social networking. I don’t think it bodes very well for Twitter’s future as a product or profitability due to the squabbling.
It’s hard to feel much more than nostalgia in 2022 for the fledgling network that remains more or less the same as ever, minus the cool new audio Twitter spaces.
What do you think about this power struggle?
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