Twitter, Elliott in deal for Dorsey to stay CEO and add directors
Twitter Inc on Monday reached an agreement with Elliott Management that lets Jack Dorsey stay as chief executive and adds three new directors a few days after Elliott’s plan to push out the social media company’s chief became public.
Elliott’s head of U.S. activism, Jesse Cohn, and private equity firm Silver Lake’s co-chief executive officer Egon Durban, will join the social media site’s board immediately and the company plans to appoint a third new director soon.
Silver Lake also will invest $1 billion in Twitter.
The agreement brings together hedge fund Elliott, which owns a $1 billion stake in Twitter, and Silver Lake in an unusual arrangement that lets Dorsey continue to lead the company, for now, and sidestep a potentially nasty proxy contest.
“While our CEO structure is unique, so is Jack and so is this company,” Twitter’s lead independent director Patrick Pichette said in a statement.
Twitter shares were up about 0.4% on a day of heavy selling on Wall Street.
In reaching the agreement with Twitter, Elliott keeps a close eye on Dorsey while also giving the company more time to formulate long-term plans and repair missteps, people familiar with Elliott’s thinking said.
They added that the deal avoids a mad scramble to find an immediate replacement for Dorsey.
Twitter’s Chief Financial Officer Ned Segal, who was privy to the discussions, said he believed the arrangement reflected more than short-term support for Dorsey.
“This is by no means thought about as temporary. This is just getting back to work with the team and the strategy, ambitions and timeframe that we were working against before,” he told Reuters in a phone interview.
“Egon joining should be a big indication of Silver Lake’s support for the founder, the team and our strategy and ambitions,” he said.
Twitter said in its statement that it would use the Silver Lake investment to help fund a $2 billion share repurchase program.
Twitter also pledged to grow daily users by 20% or more in 2020 and beyond, roughly in line with user growth in its most recent quarter and its projections that costs and expenses would increase 20% this year.
The board will also create a temporary committee to evaluate Twitter’s leadership structure and CEO succession plan that will share the results publicly before the end of the year.
Late last month Elliott nominated four directors to Twitter’s board and was pushing to remove Dorsey, one of Silicon Valley’s most prominent entrepreneurs, criticizing him for being the CEO of two publicly traded companies: Twitter and Square, a mobile payments company he co-founded.
Each company, Elliott and other investors argued, deserves a full time CEO.
Investors had also expressed concern about Dorsey’s plan to spend three to six months living in Africa this year, something he walked back last week citing “everything happening in the world, particularly with coronavirus.”
“We invested in Twitter because we see a significant opportunity for value creation at the company,” Elliott’s Cohn said. “I am looking forward to working with Jack and the board to help contribute to realizing Twitter’s full potential.”
Cohn will now sit on three boards including online shopping company eBay, which reached an agreement with Elliott in early 2019. Devin Wenig, eBay’s CEO at the time, left nine months after Elliott got a seat, citing differences with the board.
2020 promises to be a big year for Twitter with people looking to the company for news about the coronavirus, the U.S. election and the planned Olympics in Tokyo.
The company has taken more aggressive steps in recent months to curtail abusive behavior and give people control over the content they see on the platform. It is also rebuilding its ads system following technical issues that hurt profits last year.
Dorsey told analysts in January that rolling out features at a faster pace was one of Twitter’s top priorities this year, acknowledging that the company had been slow in turning ideas into products.
Silver Lake sent its first tweet ever to announce the news, saying: “Silver Lake is excited to partner with @Twitter by investing and joining the board and we look forward to working alongside @Jack and the whole team.”
Twitter is one of the few U.S. technology companies headed, but not controlled, by one of its founders. It has given shareholders equal voting rights, making Dorsey, who owns only about 2% of the company, vulnerable to a challenge from an activist investor such as Elliott.
(Content and photos syndicated via Reuters)