🐦 Does Jack Dorsey Leave Twitter As A King?

Allbirds' losses widen; Salesforce's forecast disappoints.

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🐦 Twitter: Does Jack Leave As A King?

Jack Dorsey’s on-and-off stint with Twitter Inc. (TWTR) came to an end on Monday, 15 years after he co-founded the company. Dorsey’s exit had a lot to do with him trying to split his time between Twitter and Square, and as a result, not being able to give the former his undivided attention. (Tweet This)

It’s Like Raising Two Children

When Twitter was conceptualized in 2006, the idea was to share “a short burst of inconsequential information” and “chirps from birds.” Little did Jack Dorsey, Noah Glass, Biz Stone, and Evan Williams know that that vague business idea would become the go-to platform for people to share their opinions a decade-and-a-half later.

Twitter was created as a part of a podcasting company called Odeo. Dorsey, along with Stone, Williams, and other members of Odeo, formed Obvious Corporation in 2006, which went on to acquire Odeo and its assets, including Twitter. The microblogging platform was spun-off into its own company in April 2007.

However, Dorsey was dropped as the company’s CEO just two years later in 2008, for leaving work early to attend yoga and learn fashion designing. His inability to solve a persistent outage issue and the lack of backup for the entire system were other catalysts for his ouster. Evan Williams became CEO, while Dorsey became chairman of the board.

Before his second stint at Twitter, Dorsey had launched Square (SQ) in 2009, with the idea of helping sellers start, run, and grow their businesses. The “Cash” app launched by the company went on to become its most profitable feature. 

A year later, Twitter’s board replaced Williams with then COO Dick Costolo citing his inability to manage growth, increase shareholder returns and build a more experienced executive team. Dorsey re-joined Twitter in October 2011 as its Executive Chairman.

Dorsey’s second stint as Twitter CEO came in October 2015 when Dick Costolo resigned owing to uncertain growth, a languishing share price, and an inability to clear a long-term vision for the company.

Since then, Dorsey essentially split his time between these two disparate children (Square went public the same year), and in 2017, Twitter doubled its tweet size to 280 characters from the earlier 140. Since Dorsey took over again in October 2015, the stock has returned 85% to its shareholders.

An Uneasy Legacy

Dorsey’s second coming wasn’t all hunky-dory. Twitter still struggles with its core focus – is it user growth or revenue growth, or both, or something completely different? On the other hand, Square has flourished riding the BNPL trend and has a 3X market cap compared to Twitter.

Twitter had its share of run-ins with the regulators as well. Dorsey had to testify before the Senate Intelligence Committee regarding Twitter’s role in disseminating information during the 2016 US Presidential elections.

The company continues to be accused of political bias, even in core markets like India. The platform has also been subject to multiple hacking incidents over the years. And there was the suspension of Donald Trump’s account indefinitely after the capitol hill riot in early 2020.

Activist investor Elliot Management Corp. acquired a 4% stake in Twitter in March 2020, valued at $1B, and pushed for change in the company’s top management, including replacing Dorsey as CEO. The firm’s founder Paul Singer was clear that Dorsey shouldn’t be running two public companies simultaneously.

Singer pushed for Twitter to grow its user base, accelerate revenue growth, and gain market share as a digital advertiser. In response, early this year, Twitter set itself long-term business targets: 2X increase in annual revenue to $7.5B and 315M monetizable daily active users by Q4 2023

As of Q3 this year, the number stood at 211M, which means at least another 100M users to be added over the next nine quarters – a pretty tall order. Dorsey’s fate was sealed. The installation of CTO Parag Agrawal as the new CEO and Bret Taylor as the new chairman has the blessings of Elliot.

Agrawal has his task cut out. Twitter’s stock is down 19% for the year, while closest rival Facebook is up 20%. Will he be able to juggle the many balls in the air and deliver the results that Elliott wants? Only time will tell when the bird will start chirping again!

Market Reaction
TWTR ended at $43.94, down 4.02%. Shares are down 19.4% this year.

Company Snapshot 📈

TWTR $43.94 -1.84 (4.02%)

Analyst Ratings (38 Analysts) BUY 26%  HOLD 58%  SELL 16%

Newsworthy 📰

More Losses: Allbirds shares fall after shoemaker posts wider loss despite 33% growth in sales (BIRD -6.29%)

Competition: Salesforce shares fall on disappointing profit forecast (CRM -6.19%)

Escape: FDA advisory panel narrowly endorses Merck’s oral Covid treatment pill despite safety concerns & reduced efficacy (MRK +1.99%)

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Today’s Market Terminology: Order Backlog

Order backlog is a buildup of work that needs to be completed. The presence of a backlog may have a positive or negative implications depending on the specific situation

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