Why Twitter’s mehness could sink Jack Dorsey

Twitter is about to be subject to the kind of trolling its millions of users have long suffered. A hedge fund has reportedly amassed enough stock to make a run at ousting Jack Dorsey, the company’s cofounder and CEO and a charter member of the beard-of-the-month club.

The timing is a bit surprising. Twitter is no longer the financial disaster it was when Dorsey returned for round two as CEO back in 2015. On November 1, 2015, just after Dorsey was crowned king again, Twitter’s stock was trading at $25.40 per share. Yesterday, the stock closed at $35.82 per share.

Under Dorsey, Twitter’s annual revenue rose from $2.5 billion in 2016 to $3.46 billion in 2019. And the company has turned an annual profit the last two years.

On the whole, that’s a solid job. Certainly not a catastrophe.

But according to numerous reports, activist investor Elliot Management has spent $1 billion buying 4.4% of Twitter’s stock. The goal is to force some changes by nominating four board members, according to Bloomberg, and possibly pushing to remove Dorsey.

A word of caution: Such tactics can often be a way of sending a signal or opening a negotiation. Apple faced a revolt in 2013, when its stock had taken a beating the previous year and questions were being raised about CEO Tim Cook’s leadership. Apple had started a dividend program and stock buyback effort in 2012, but investor activists led by Carl Icahn wanted the company to go bigger.

Apple and Cook seem to be doing fine now.

It’s unlikely that Elliot Management wants cash returned to investors. More likely, its ire relates to the ongoing mehness of Twitter’s product development. While rival platforms such as Facebook have grown at monstrous paces, they have also continually revitalized and expanded their platforms, either through product development or acquisitions.

Almost 14 years after its founding, Twitter is still pretty much just Twitter. The company has always been conservative when it comes to product development. If anything, improvisation from users has led to incrementally useful product updates, including the hashtag, the tweetstorm format, and longer tweets.

Twitter has been focused on cleaning up the cesspool of fake news, misogyny, and harassment that run rampant on the platform, though bad actors seem largely undeterred. Anyone spending a little time checking out something like political news will see just how quickly the platform gets overrun by bots pushing a particular agenda.

Otherwise, Twitter has been surprisingly unadventurous. For instance, as the world moved to messaging apps, the company seemed uninterested in expanding the utility of its direct messaging feature to something like a Facebook Messenger.

Meanwhile, Dorsey continues to serve as CEO of Square. His constant travel has raised some eyebrows, as did his statement last fall that he was considering living in Africa for six months this year.

And the lack of innovation, or even moderately aggressive development of new features, has left Dorsey open to this shareholder challenge. Most likely, Elliot Management wants to push for more focus and hear a more coherent long-term plan. That could include a demand that Dorsey choose between Square and Twitter. It could also mean a restructuring of operations and product development.

Of course, Dorsey is also getting support. Twitter employees have started the #WeBackJack hashtag. And Mr. Tesla, hot off his legal brushes with securities regulators and a defamation lawsuit, says Dorsey has a good heart.

Dorsey seems to be well liked within Twitter. And while the company has a relatively small number of users compared to Facebook, its cultural impact is undeniable. Whether it’s President Trump or some random celebrity, nothing gets the world chattering like a tweet.

The company could be content with that, and trudge along for years to come. But it’s going to have to make the case to some restless investors that a part-time CEO and a cautious approach are enough to ensure Twitter’s future.

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