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Twitter Up on Elliott Stake Buyout, CEO Replacement Likely

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Shares of Twitter, Inc. (TWTR - Free Report) gained nearly 8% on Mar 2 after news of an activist investor buying significant equity stake in the social media company surfaced. According to Blomberg reports, Elliott Management Corporation has bought Twitter’s shares worth more than $1 billion.

Elliott Eyes Replacing Twitter CEO

Reportedly, the investment amount signifies Elliott Management gaining nearly 4-5% equity stake in the company. The billionaire Paul Singer-led investment firm now seeks three to four seats in Twitter’s eight-member board.

Additionally, Elliott intends to implement a number of strategic changes, including the replacement of Twitter CEO Jack Dorsey, people familiar with the matter revealed to Bloomberg. The investment management firm believes Dorsey is not giving his full attention to Twitter due to too many other projects he is currently involved in.

Notably, apart from Twitter, Dorsey is also handling the CEO post at Square (SQ - Free Report) , which he had co-founded with Jim McKelvey in 2009. Additionally, Dorsey has been criticized for his growing interest in crypto currency and Africa. Last year, Dorsey said that he intends to spend three-six months in Africa in 2020, as the “country could decide the future of crypto currency”.

People familiar with the matter revealed to Bloomberg that Elliott believes Dorsey should give full attention to Twitter in view of the major events happening this year, including the coronavirus outbreak, U.S. elections and Summer Olympics.

In view of the aforementioned events, Elliott believes “CEO to oversee the role it plays in disseminating information, especially when new users and advertisers are flocking to the platform,” Bloomberg reported. Notably, the social media company has always been criticized for its failure in handling trolls, hate and false speeches.



Elon Musk Voices Support for Dorsey

A large number of Twitter employees and at least one big entrepreneur have come ahead in support of Dorsey. The company’s employees have created a hastag #WeBackJack to show their support for Dorsey. The CEO of Tesla TSLA, Elon Musk, also voiced support for Dorsey and tweeted, "Just want say that I support @Jack as Twitter CEO.”

While it is still not known whether or not Elliott Management would succeed in its effort to replace Dorsey, it is certain that big changes are coming in for Twitter. We could expect management to be more focused on boosting its user base and advertising revenues by adding fresh features to its platform and enhance product portfolio.

Zacks Rank and A Key Pick

Twitter currently carries a Zacks Rank #3 (Hold).

A better-ranked stock in the Internet-Services industry is Dropbox, Inc. DBX, which sports a Zacks Rank #1 (Strong Buy). Dropbox’s long-term expected EPS growth rate is 22.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.

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