Twitter has recently gained two activist shareholders, which has increased the pressure on the board of the social network considerably. The CEO and co-founder, Jack Dorsey, is already on his way out.

Elliott Management Corporation took a 4 percent stake in Twitter since the beginning of this month and immediate increased the pressure on the company. According to the new shareholder, Twitter’s performance is below par. The company is on the wrong track and things need to be changed. To start with, Jack Dorsey should exit the company, that was the first requirement.

Jack Dorsey, co-founder of Twitter and CEO, is obviously not happy with the new involvement of Elliott Management. He managed to convince Silver Lake to invest one billion dollar in Twitter and to close a deal with Elliot Management. The investment of 1 billion dollars plus another two billion dollars in cash will be used to buy back the company’s own shares, this should bring the share price back up.

It is a solution for Dorsey to stay on as CEO for the time being. However, it is also a very temporary solution, because Twitter has not been doing very well in recent years. The expectation is that Dorsey will still have to leave this year if the company doesn’t perform better fast.

Both Elliott Management and Silver Lake now have a seat on the board of Twitter and can therefore put pressure on the company. One of the first things they have done is set up a performance program for Dorsey to get the company in the right direction. In short, if Twitter’s results don’t improve quickly, Dorsey will have to leave. Elliott Management wants to see a growth of 20 percent year-on-year in users from which money can be earned. In 2019, for the first time in years, Twitter achieved the 20 percent growth again, but that seems to be almost impossible for this year.

Financial choices

If we look at the financial situation, Dorsey might have made a huge mistake. He has decided to stop allowing political ads on the social media platform. A decision that will cause Twitter to miss out on a lot of revenue because this year there are presidential elections in the United States. That budget now goes entirely to Facebook and Google.

On top of that many companies have also reduced their marketing activities for this year due to the coronavirus. A lot of production takes place in China and because the country has been hit hard by the virus, production has come to a standstill in many cases.

Major sporting events usually lead to an increase in Twitter users and advertising revenue. Due to the coronavirus major sporting events have already been cancelled or are under great pressure to make adjustments. Many business events have also been cancelled that usually promote the usage of Twitter. As a result of all these events, the growth of 20 percent is already in immediate danger.

Twitter has had the chance to become really big, but has never been able to develop itself like Facebook or Instagram. It should come as no surprise that there are now shareholders who see potential, but want a change of management and strategy.