Suspension of President Trump may test Twitter CEO’s truce with key investors

Platform News: Twitter and Square CEO Jack Dorsey

Twitter’s decision to suspend President Trump’s account on the platform will potentially reignite an issue involving CEO Jack Dorsey and leading shareholders of the controversial social media platform.

In early 2020, Dorsey confronted calls from Elliott Management Corp to step down, after the hedge fund argued that he was paying too little attention to Twitter while also running payments processing company Square Inc.. He fended off this strain by providing Elliott and its ally, buyout firm Silver Lake Partners, seats on Twitter’s board.

Since that time, Twitter stocks had climbed more than 70% as of Friday – the day Twitter suspended Trump – since users flocked into the app for information in the wake of the COVID-19 pandemic. Nevertheless its stock has dropped 9 percent this week amid investor worries that banning Trump would alienate some of his 88 million followers from the popular social media platform and activate a new push by lawmakers to govern it.

An agreement that prevents Elliott and Silver Lake from trying to affect Twitter’s content moderation and user coverage expires this spring. Both investment firms declined to comment on whether they would seek to intervene once the arrangement expires.

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Twitter didn’t respond to your request for comment or make Dorsey available for a meeting.

Elliott’s creator, Paul Singer, is a major financial backer of Trump’s GOP. The hedge fund required a 4% stake in Twitter as soon as the stock was hovering around $30, and remains in the black with the shares now trading at about $47. Silver Lake spent $1 billion in Twitter’s convertible bonds which give it the equivalent of a 3% stake.

Analysts and investors said that the effects of the ban on Dorsey’s standing with investors will hinge on whether the movement weighs about the organization’s longer-term growth prospects, and that the chances of a regulatory crackdown on the app were difficult to assess. Many stated, however, they anticipated most Twitter consumers to remain on the platform and leading shareholders to stick with the corporation.

Agents for top Twitter investors, such as BlackRock, Vanguard and Fidelity, declined to comment.

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The reaction of advertisers, from whom Twitter derives the majority of its earnings, will be key. Many are attracted to the platform due to its elevated user “engagement,” a measure of how busy and involved individuals are if they use the app, and are fearful of becoming mired in controversy,” said Mark Douglas, leader of SteelHouse, that offers marketing applications to help marketers reach crowds across TV, Web and mobile media.

Advertisers often pull their ads in times of political or cultural turmoil, such as the wake of George Floyd’s death in May. Twitter has acknowledged this risk, warning investors in October that the US election could affect its advertising sales.

“We just worry that last week’s news flow will remind advertisers how dark of a sewer that Twitter’s environment truly is,” said Michael Nathanson, an analyst in MoffettNathanson.

Some investors said Jack Dorsey could argue he was left no alternative but to suspend Trump after his rally of supporters in Washington, DC seeking to overturn the results of this US election led to the storming of the US Capitol building, which resulted in the deaths of five individuals. Other internet giants, for example Facebook and Alphabet, also cracked down on content produced by Trump and his supporters.

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“We think Twitter is undergoing a turnaround and will show very nice growth numbers. Replacing a Chief Executive Officer in the middle of that effort would interrupt all of those good things,” said Sahm Adrangi, founder and portfolio manager of Kerrisdale Capital Management, Twitter’s 40th-largest shareholder.

The team at Platform Executive hope you have enjoyed this news article. Translation from English to other languages via Google Cloud Translation. Initial reporting via our official content partners at Thomson Reuters.

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