Jack Dorsey, Twitter's Eccentric CEO, Could Be Looking For A Job Soon

Mar 1, 2020
Originally published on March 2, 2020 6:08 am

Jack Dorsey isn't your regular CEO. He often says and does things that raise eyebrows.

Now, one large investor has had enough. The powerful hedge fund Elliott Management has bought a sizable stake in Twitter in hopes of bringing change to the social media company.

Elliott is concerned that Dorsey hasn't focused enough on Twitter, because he is also chief executive of payments company Square. The hedge fund is pushing for a CEO whose sole job is running Twitter.

Adding pressure, Elliott has nominated four directors to the company's board, according to two people familiar with the matter. The two sides have had constructive talks, according to the people, who were not authorized to speak publicly. Twitter and Elliott declined to comment.

The worry is that under Dorsey's leadership, Twitter is not poised to capitalize on a flood of news this year, including the U.S. presidential election, the summer Olympic Games in Tokyo and the coronavirus outbreak, that could attract people and advertisers to the platform.

The soft-spoken Dorsey has brought attention to himself for many things beyond his unusual twin CEO jobs, which have him splitting his time between Twitter and Square.

He recently tweeted that he is moving to Africa for three to six months in 2020. He told Wired Magazine he eats just one meal a day and tries to spend two hours a day meditating. In 2018, he got a lot of criticism over a silent meditation retreat he went on in Myanmar. He tweeted that during the 10-day "vipassana" retreat, he stayed away from "devices, reading, writing, physical excercise (sic), music, intoxicants, meat, talking, or even eye contact."

As Dorsey tweets about his life choices, investors have become restless about whether he's the right CEO to lead Twitter.

The company has struggled to grow its business at the same pace as its biggest competitors in Silicon Valley. That includes the much-larger Facebook, as well as newer apps like Snapchat and TikTok that are popular with young people.

While Twitter has hundreds of millions of users and is popular among celebrities, the media and political figures, notably President Donald Trump, critics say it has been slow to innovate. It has also struggled with misinformation and handling abusive users and trolls.

Twitter's quarterly revenue, mainly from ads, passed $1 billion for the first time at the end of last year. Facebook, by contrast, reported $21 billion in sales in the same quarter, and has billions of users.

Twitter's shares are worth less now than they were when Dorsey returned as CEO in 2015. He was the company's founding CEO, but left in 2008 after a falling out with another co-founder.

"I think product development has been anemic," said Scott Galloway, a marketing professor at NYU who bought Twitter shares because he thought it was undervalued. "I think their business model is flawed, But more than anything, you know, the lowest lying fruit here is to find a full time CEO."

Dorsey's Africa plans spurred Galloway to write a letter to Twitter's board in December calling on them to replace Dorsey. Galloway said he never got a response, and has since sold all his shares.

In Elliott, Twitter faces a much more formidable antagonist. The hedge fund manages nearly $40 billion in assets and has made a name for itself taking on big companies. It has successfully pushed for changes at eBay and AT&T, and it recently took a stake in SoftBank, the Japanese conglomerate.

"Elliott is pretty notorious for being activist," said Michael Pachter, an analyst at Wedbush Securities. "Their history has been to pick battles that they think they can win."

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MICHEL MARTIN, HOST:

The CEO of Twitter could be looking for a new job soon. An activist investor has been buying shares in the social media company and now wants to make big changes. NPR's Shannon Bond has the story.

SHANNON BOND, BYLINE: Jack Dorsey isn't your typical CEO. He's a dedicated yogi and is known for his extreme personal habits like intermittent fasting. Here's what he told Wired magazine in January.

(SOUNDBITE OF INTERVIEW)

JACK DORSEY: I try to meditate two hours every single day. And I eat seven meals every week - just dinner.

BOND: Not long ago, he said he was moving to Africa for three to six months this year. But the most unusual thing about Dorsey - he's CEO of two companies, Twitter and also a payments company, Square. Now one large investor has had enough and says Twitter needs a full-time CEO.

Elliott Management is a big hedge fund without much patience for leaders who don't deliver. It's bought a sizable stake in Twitter and nominated four directors to the board, according to people familiar with the matter. Twitter and Elliott both declined to comment. Elliott is following a playbook it's used to force change at other big companies like eBay and AT&T.

MICHAEL PACHTER: Elliott is pretty notorious for being activist. And they're pretty accomplished. So their history has been to pick battles that they think they can win.

BOND: Michael Pachter is an analyst at Wedbush Securities. He says that even if Jack Dorsey ends up keeping his job, Elliott can still make its point and make some money.

PACHTER: The downside for them if they fail is they get the dialogue going. They get investors talking about how the target company could be significantly more profitable, and the stock tends to go up.

BOND: Elliott has zeroed in on Twitter because it thinks the company could be worth a lot more. Twitter is influential and popular with celebrities and public figures, including President Trump. But it just hasn't grown the way other social media companies have. It has hundreds of millions of users compared with Facebook's billions. And it brings in only a fraction of Facebook's ad revenue. That's frustrated investors.

SCOTT GALLOWAY: I think product development has been anemic. I think their business model is flawed.

BOND: Scott Galloway is a marketing professor at NYU and a Twitter investor until recently. After Dorsey said he was moving to Africa, Galloway wrote a letter to Twitter's board urging them to replace him.

GALLOWAY: But more than anything, the lowest-lying fruit here is to find a full-time CEO.

BOND: Galloway says he never got a response, and he sold all his shares. So far, Elliott and Twitter have had constructive talks, according to the people I spoke with. But this fight adds pressure on Twitter. It's struggling to deal with misinformation and how to handle abuse of users and trolls.

2020 is a big year. News events like the presidential election, the Summer Olympics in Tokyo and the coronavirus outbreak should all attract people and advertisers to the platform. The question is, is Jack Dorsey the right CEO for Twitter today?

Shannon Bond, NPR News, San Francisco. Transcript provided by NPR, Copyright NPR.