Elliott Management Pushes For Twitter CEO Jack Dorsey's Exit, Analyst Sees Increased Possibility Of Sale

Twitter Inc TWTR is likely bracing for a brewing boardroom battle, according to a Friday Bloomberg report. 

Elliott Management, the hedge fund founded by Paul Singer, has taken a considerable stake in Twitter, Bloomberg reported, citing people familiar with the matter.

The stake is worth about $1 billion, according to The Wall Street Journal. 

Elliott is pushing for a major overhaul at Twitter that would include the replacement of founder and CEO Jack Dorsey, Bloomberg said. 

The activist investor is reportedly prepping to nominate four of its members to the social media company's board, even as only three board seats are coming up for election at this year's annual meeting.

"Elliott wanted to ensure that it nominated enough directors to fill all three seats or any other vacancies that may arise," Bloomberg reported. 

Twitter's Leadership Questioned

Elliott seems to have had private discussions with Twitter regarding its concerns, Bloomberg said.

Dorsey was at the helm of Twitter when it was spun off as an independent company in 2007 and was replaced by co-founder Evan Williams as CEO in 2008, while Dorsey transitioned to a chairman role. 

Williams stepped down in 2010 and was replaced by Richard William Costolo. Following Costolo's departure in 2015, Dorsey took over the CEO role on an interim basis.

Impatient investors have of late begun questioning Dorsey's ability to spearhead Twitter and take it along the path of sustainable growth.

Dorsey has been criticized for splitting time between Twitter and Square Inc SQ, as he is the CEO of the payment processing service provider as well. He has also disclosed plans of working six months in a year in Africa.

Evercore ISI Sees Possible Twitter M&A Play, Upgrades Stock 

Dorsey's replacement is unlikely to solve the structural issues that dog sustainable free cash flow growth, Evercore ISI analyst Kevin Rippey said in a Monday upgrade note. 

Evercore ISI upgraded Twitter from Underperform to In Line and raised the price target from $29 to $33. 

Twitter has no management shortcomings on the issues of user growth, monetization, cost controls and capital structure, the analyst said. 

The analyst sees a potential replacement of Dorsey as increasing the likelihood of a sale of the company.

"Conviction in our short thesis is diminished, as Elliott's involvement will likely focus investors' attention on Twitter's potential strategic value, and the risk/reward is more balanced following last week's dramatic market selloff."

A Lot At Stake For Twitter 

The boardroom rumblings could not have come at a worse time for Twitter, as the platform is in the midst of communications about the ongoing COVID-19 virus outbreak and upcoming events such as the Summer Olympics and U.S. presidential election. 

35.90 USD +2.70 (8.15%)

Twitter shares were trading 8.15% higher at $35.90 at the time of publication Monday. 

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