Twitter is not going to fire CEO Jack Dorsey. Yet.
That’s because Twitter has announced a temporary cease-fire with Elliott Management, the “activist investor” fund that wanted Dorsey replaced. But the emphasis here should be on “temporary.” The agreement Twitter and Elliott announced today gives Elliott the tools it will need to boot Dorsey, sooner than later.
Here are the quick details:
- Elliott Management executive Jesse Cohn, who had been the driving force behind Elliott’s campaign to replace Dorsey, is getting a seat on Twitter’s board of directors.
- Cohn will also sit on a new board committee that will “evaluate the CEO succession plan with the CEO.” It will make a decision by the end of the year.
- Silver Lake, the private equity firm that looked at buying Twitter in 2016, will also get a seat on the Twitter board — specifically, a seat on the board committee that will evaluate Dorsey’s performance.
- Silver Lake will buy $1 billion worth of Twitter’s debt, and Twitter will use the money from that investment, plus its own cash, to spend $2 billion on stock buybacks, one of Wall Street’s favorite gambits to push up stock prices.
- Twitter has promised to grow its user base by 20 percent for the rest of the year (Twitter grew that number by 21 percent last quarter), and that its revenue growth and share of the digital ad market — dominated by Google and Facebook — will tick up.
To sum up, Elliott wanted Jack Dorsey gone. That won’t happen right away, but it could certainly happen by the end of this year since Elliott now has a seat at the table. Again, if you want a road map for how this stuff works, look at eBay. Its last CEO was replaced the same year Elliott got a seat at that company’s table.
Another scenario, which would also make Elliott happy, would be a deal to sell Twitter to … someone else. And Elliott and Silver Lake are now in a better position to make that happen than they were a week ago.
A third scenario, which is much less likely but still theoretically possible, is Jack Dorsey wows everyone over the next few months and ends up keeping his job, Twitter shares go way up, and everyone is happy.
Or, to put it another way, which will make sense for people who’ve worked at a company of a certain size: At those companies, when managers want to fire someone, they don’t fire them immediately because they want to create a paper trail they think will protect them legally. So they create a “performance improvement plan,” which spells out the employee’s problems and lists the ways the employee will fix them as well as a timetable, etc. It’s a bunch of corporate kabuki because no one expects the employee to improve their performance. But when the managers eventually fire the employee, they can point to the performance improvement plan. That’s what we’re looking at here.
Two more notes:
- Because Paul Singer, Elliott’s owner, is a prominent Republican donor, some Twitter types have speculated that Elliott’s motivation here is political. That’s a dumb theory, but that’s what Twitter is (in part) for. In any case, Elliott and Silver Lake have inserted a clause into their deal that makes them vow to keep their hands off Twitter, at least when it comes to politics: “Neither Elliott nor Silver Lake, will comment on or influence, or attempt to influence, directly or indirectly, any Twitter policies or rules, or policy or rule enforcement decisions, related to the Twitter platform. Elliott and Silver Lake further commit to, and emphasize the importance of, maintaining the independence and impartiality of the Twitter platform and its rules and enforcement.”
- If you wanted to pick a day to have a major bit of tech news ignored because the global financial system looks like it might seize up, this would be that day.
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