A hedge fund called Elliott Management Corp obtained a very large ownership stake in Twitter on Monday, and has been advocating for the replacement of current Twitter CEO Jack Dorsey. The news was first reported by Bloomberg, and then confirmed by Reuters. The hedge fund has nominated four people it wants to see fill three vacant seats on Twitter’s board of directors.
Elliott Management Corp, which is based in New York, was founded by conservative billionaire Paul Singer. The hedge fund is allegedly having “constructive discussions” with Twitter, which will likely include a restructuring of the company’s management and corporate structure.
It is unclear just how big of a stake Elliott now has in Twitter. Depending on the size of their ownership, Dorsey’s job could be completely safe, or he could be at serious risk of being ousted. It’s unclear, at the time of this writing, who the hedge fund would want to replace Dorsey with.
Elliott is known as an activist investor, often buying up large stakes in publicly traded companies in order to encourage sweeping changes from the top down. Their normal goal when doing so is to increase the company’s trading stock value, thus further enriching themselves as owners of substantial shares of that stock.
In essence, the company spends money to make money by telling companies how to make even more money.
Despite being in existence for over a decade, Twitter only turned its first profitable year in 2018. The social media network, a favorite of reporters, video game companies and Donald Trump, has been slow to issue new features to users.
Yes, it’s constantly being used on cellphones for a few minutes at a time. But despite its popularity, the app hasn’t had the same draw as competitors like Snapchat and Instagram.
Twitter currently faces accusations of spreading misinformation. It’s also accused of suppressing the free exchange of ideas and being home to countless spam and bot accounts. The platform is also struggling with declining user numbers. Public perception of the platform is far from ideal: many associate the site with partisan division, arguments and petty bickering.
Twitter is uniquely vulnerable to the kind of activist investment Elliott engages in. Unlike many other publicly traded tech companies, Twitter issues only one type of stock: common stock. This means that a sufficiently wealthy investor can affect changes by buying enough stock and nominating directors to the board.
Depending on how much money Elliott has sunk into this endeavor, Dorsey could find himself out of a job soon.
