Elliott Management Corporation has increased its stake in Twitter and is seeking the removal of its chief executive, Jack Dorsey, amidst other changes according to Bloomberg.
The hedge fund, founded by billionaire Paul Singer is seeking to install its own nominees on Twitter’s board at its upcoming annual general meeting. Twitter has a board of eight and three are up for re-election at the coming annual general meeting.
Elliot Management Corporation has more than $40 billion in assets. The hedge fund has targeted companies from eBay Inc. to SoftBank Group Corp in recent months.
Elliot Management Corporation isn’t the only investor to express its dissatisfaction with Twitter’s leadership.
In December 2019, Scott Galloway, a professor of marketing at New York University’s Stern School of Business, aired his concerns as an investor.
“To be clear, my primary objective is the replacement of CEO Jack Dorsey. However, your firm’s weapons of mass entrenchment include a staggered board that may force shareholders to seek to replace other directors, including yourself, first,” Galloway said in an open letter to Twitter’s executive chairman, Omid Kordestani.
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Issuing only one class of stock leaves Twitter vulnerable to activist investors
Unlike many other companies, Twitter only issues one class of stock, leaving them open to activist investors. An activist investor is an investment firm that aims to persuade management teams to make sweeping changes aimed at reviving stock prices. Issuing only one class of stock means that co-founder, Dorsey doesn’t have voting control of the company.
This is unlike what Facebook Inc.’s Mark Zuckerberg has.
Dorsey co-founded Twitter in 2006 and served as CEO until 2008 before he was replaced by another co-founder Evan Williams. Williams had accused Dorsey of not focusing enough on Twitter’s profitability and being a poor manager. Dorsey then came back as interim CEO in July 2015 after his predecessor D**k Costolo stepped down.
Dorsey also serves as CEO of Square Inc. Thus, he joins the likes of Tim Cook and Elon Musk as CEO of two large corporations at the same time. Cook ran both Apple and Pixar while Elon Musk runs Tesla and rocket maker Space X.
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