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Twitter: Elliott To The Rescue

Mar. 03, 2020 6:29 PM ETTwitter, Inc. (TWTR)51 Comments


  • Elliott Management is pushing for the ousting of Twitter CEO Jack Dorsey.
  • Jack has done an exceptional job of returning Twitter to substantial user growth.
  • Twitter has failed to take any reasonable monetization path beyond digital ads on Twitter.
  • The company could have a clear path to $10 billion in annual revenues by adding subscription services and monetizing Periscope or even Vine.
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According to news reports, Elliott Management has built a $1 billion stake in Twitter (TWTR) and plans to push for ouster of CEO Jack Dorsey. The move is definitely controversial as the social media site has made an enormous turnaround under his leadership, but the company has also failed to capitalize on tons of promising assets. My investment thesis remains highly bullish on the stock based on the accelerating user growth and cheap valuation.

Image Source: Vine website

Jack Dorsey Legacy

Jack Dorsey took over the interim CEO role from Dick Costolo on July 1, 2015. By October, he had become the full-time CEO. He was already the CEO of Square (SQ) and has maintained these dual roles for going on five years now.

His latest push to move to Africa for up to six months has a lot of detractors pushing for his ouster. The primary issue has been a string of revenue issues during his tenure, while Jack has done an exceptional job turning around user growth.

In the latest quarter, Twitter saw monetizable daily active users (mDAUs) jumping 21% to 152 million. During 2015, the number had stalled at 93 million. In the four years ending Q4, mDAUs were up 63%.

Despite facing a clear user issue back in 2015, the company still had revenues growing by over 50%. As users actually flatlined in the year, Twitter lost momentum, and revenues actually fell in early 2017.

Source: Seeking Alpha earnings

Prior to his arrival, Twitter hired Anthony Noto from Goldman Sachs as the CFO. His connections to Wall Street and the NFL paid off, with the social media site acquiring the rights to air Thursday Night Football games for the 2016 season in a move that turned around the prospects of the company.

Eventually, Noto became the de-facto

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This article was written by

Stone Fox Capital profile picture

Stone Fox Capital (aka Mark Holder) is a CPA with degrees in Accounting and Finance. He is also Series 65 licensed and has 30 years of investing experience, including 10 years as a portfolio manager.

Mark leads the investing group Out Fox The Street where he shares stock picks and deep research to help readers uncover potential multibaggers while managing portfolio risk via diversification. Features include various model portfolios, stock picks with identifiable catalysts, daily updates, real-time alerts, and access to community chat and direct chat with Mark for questions. Learn more.

Analyst’s Disclosure: I am/we are long TWTR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (51)

Stone Fox Capital profile picture
No surprise here.

-Twitter (NYSE:TWTR) has withdrawn guidance as it faces down impact from the COVID-19 pandemic.

-The company has pulled its revenue and operating income outlook for Q1, along with its full-year forecast for expenses, stock-based compensation, headcount and capital expenditures.

-Conversation about the virus along with product improvements are driving strength in monetizable daily active users, though, with quarter-to-date mDAU up 23% to 164M.
Stone Fox Capital profile picture
Cleaning up the platform was a must, but always felt Dorsey was taking it to far politically. He lost a lot of credibility when celebs could wish death on the President and it wasn't cleaned up for the health of the platform. Not to mention, what business would allow attacks on their #1 customer? lol

-The effort by CEO Jack Dorsey to clean up a toxic environment on Twitter (NYSE:TWTR) has stalled, the WSJ says, and it could be complicated by new activist pressures.
Stone Fox Capital profile picture
Dorsey having 2nd thoughts on Africa... like the angle of promoting the use of Twitter to Africa, but that still doesn't like his point.

-Speaking to Morgan Stanley's TMT conference, the CEO of Twitter (TWTR -3.7%) and Square (SQ -2.6%) says "When I tweeted about my intention to spend a few months in Africa this year, I made a mistake and should have provided more context about why."
Stone - Here’s part of a post I made on another thread back on March 2:

“...On the other hand, a CEO shouldn’t casually be implying that he might just ‘move to Africa’ for a portion of the year without offering some detail as to why. I like what Dorsey has done, but things like that border on being irresponsible and just make for fodder that can easily be blown way out of proportion. There’s a balance and Dorsey needs to find it.”

Today, he’s doing exactly that by ‘providing more context’. Maybe he is working to find more balance between being who he is and being the CEO of a multi-billion dollar enterprise. It’s a process. But I’m glad he stepped up to it.
He makes to many mistakes let see 2019 his account and many others hacked including the NFL and some well known actors. Then of course the ad software screw up with no accountability and now you say you made a mistake and should have provided more context about why you are moving to Africa that is bullshit. You just bought another company with 4 to 7 former FB engineers and you never made public to Twitters share holders the cost. You already have over 400 engineers at Twitter that can't come up with Jack shit so you go out and buy a company just to get there engineers in the hope's they have a brain. Twitter didn't come up with this new fleets tweet disappearing after 24 hrs the company you just bought with the former FB engineers did WTF!! This tells me you have a lot of dead weight at Twitter including yourself Jack.
A_Fava profile picture
So you claim their leadership is exceptional despite trading sideways the last 5 years and giving up on Vine, under Dorsey, which had over 100 million users. He's still an anchor on the business despite slight improvements in certain metrics.
Stone Fox Capital profile picture
wait, how did you come to that conclusion? Said they did an exceptional job turning around the user base, but this article has a title of "Elliott to the Rescue". Good leadership doesn't need a rescue.
Stone Fox Capital profile picture
Interesting to see if fleets work. Personally don't use Twitter for stuff to disappear, but maybe this will bring in new users.

-The fleets differ from tweets in that they'll disappear after 24 hours; can't receive likes, replies or retweets; and otherwise won't be circulated through the network, or show up in Search or Moments.
May help bring in new users who are concerned about their posts ‘living forever’. But it better not replace tweets. Sharing Twitter links outside of Twitter is something my friends and associates and I do amongst ourselves regularly. Each time someone receives one, it typically draws them into Twitter. If that capability disappeared, I can see my own use declining for sure.

Yes, there's many news outlets that quote twits. That's why I think they don't want edit button. Suppose Trump twits some nonsense. All news venues will link that twit. Then, if he edits the twit and changes the content, the news story is invalidated. I think that's the DNA of news: it's always live and you can't take it back.
Boraxis - This is obviously different from an edit capability. Many users (like Trump for example) WANT their comments posted everywhere. Others don’t and adding this option seems to be intended to draw those people into Twitter. I doubt it’s a game changer one way or the other. But it’s an interesting idea to test at least.
Twitter is loosing so much during this election because Jack Dorsey is so bias, If I were the CEO at Twitter I would have had a Town Hall type of conversation live on Twitter at lease once a week with each candidate so everyone can Tweet questions and comment on the answers. Just think of the engagement this would bring to Twitter. Twitter is suppose to be about the conversation so lets have one.
Come on. Twitter is no place to have a ‘conversation’. It’s a place you look to in order to follow developing news. The elections will produce plenty of traffic on Twitter. Already have.

Town Hall meetings become out of hand and unmanageable shouting events when you have 50 people in the room. Can you imagine what would happen if you tried to have one on a platform like Twitter? OMG...No thanks...Bad idea...
Jack Dorsey is the one who said Twitter is all about the conversation.
Come on you cant shout on Twitter!!
Stone - Everybody wants to give Noto credit for turning Twitter around and he certainly deserves some of that credit. But let’s not forget that Noto was one of only a very few senior managers that Dorsey retained when he went about draining the swamp. Dorsey deserves credit for good judgement. Additionally, Noto left for a CEO role and not because he was pushed out or because he was unhappy with Twitter or Dorsey as far as I know. Hell, he probably came to Twitter because he thought he’d succeed Costolo at CEO and knew that when Dorsey came back that door had closed for a while at least. Good for him.
jack didn't do sh*t. trump and elon did all the work .
If Trump and Elon didn’t believe they were reaching a lot of people on the platform, they wouldn’t be using it. Kind of a chicken and egg question. Jack built (and recently rebuilt to a degree) the platform.
let me tell you the story of a bug they discovered that lets advertisers target their ads to certain groups of people. The story is simple, the bug wasn't a bug. It was there on purpose.
I know that story well. Whether it was a ‘feature’ or a bug, they were able to recover with a strong Q4 after removing it.
Bring back Noto. Promote someone internally. Sell the company. Lots of choices, but I’m voting for Jack to hit the road.
me too! I'm voting to have him hit the road as well.
Stone Fox Capital profile picture
@MJ Pragmatist @mikefornow
He needs to become Chairman, which is basically what he does now.
Noto raped Twitter's piggy bank.
Fools rush into where angels fear to thread. Didn't they replace Jack Dorsey with a business school CEO, Dick Costolo. And what happened next: Twitter was worse on every single metric: user engagement, revenue, you name it. So, Jack comes back and stops the disaster, and now some Wall Street raiders with barely 3% of the company want him replaced. With who? With another Costolo?

You guys must be insane if you think that this guys will show up, replace Jack, and magically the company will make billions overnight.
Also these ideas for subscription services are garbage. Why do you think Zuckerberg went great lengths to say that Facebook will always be free for users? Because he's stupid? No! Because knows that as soon as subscription services is a thing, users will leave the platform en masse! So you want some corporate Bozos, that don't even have a twitter account, that do not know anything about social media, experiment with some wacky ideas that will bring in a quick buck but ruin the company? No, thank you!
Boraxis. I agree with you. Having a subscription service on Twitter will be a disaster. A total disaster. I don’t know why that is even being considered. Focus on Periscope and establish a way to monetize that platform. That will be the key to future revenue and user growth.
I don’t know if I agree completely with all of that. I’m on record as saying that I think Dorsey has done a terrific job at Twitter and I’m not ready to push him out at this point. But, it is time now to better monetize the platform. I’m also not sure that a subscription service would necessarily be a bad idea. But it would have to be something on top of the existing service and not a replacement of it. You should be always able to join and view Twitter for ‘free’. But there may be some value added services that they can provide to publishers (producers of content) that could command small subscription fees. Their Data Licensing business may be laying the groundwork for something like this.
Stone You keep mentioning Vine Twitter no longer owns Vine.
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