Jack Dorsey resigned as Twitter (NYSE:TWTR) CEO yesterday. When the media first reported the news, the Twitter stock price leapt about 10% higher in premarket trading but ended the day down 2.74%. Dorsey, who co-founded Twitter, makes way for former Twitter chief technology officer Parag Agrawal.
The Twitter share price has been sliding since March 2021. Although Dorsey’s departure first lifted the Twitter stock price, the stock continued on its bearish trend lower after the initial euphoria. That suggests that investors ultimately decided that a change at the top will not change the company’s fortunes no matter who is in charge. Or perhaps investors were excited initially but then cooled off when they saw who the new CEO was. Agrawal is a decidedly safe pick for the new CEO of Twitter. He is a tech guy and an insider who has been with the company for 10 years. But that’s maybe not what Twitter needs. More importantly, it’s probably not what Twitter investors think it needs.
What is moving the Twitter share price?
Elliot Management, an activist investor, had been agitating for Dorsey to step down for around two years. Elliot felt that Dorsey, who also runs Square, was a part-time CEO, failing to get the best out of Twitter. After Elliot announced its stake in Twitter and started agitating for change, the Twitter stock price increased 40%. That hints that Twitter investors were happy that someone would try and shake things up at the company.
But after Twitter announced ambitious plans in February 2021 and so-called part-time CEO Dorsey remained at the helm, the stock price started to slide. Investors may have become disillusioned about anything changing, with everything staying the same.
Little is known about Agrawal. It is probably a bit unfair to judge him so soon. However, reading the Twitter stock price action suggests that investors are at best lukewarm about the possibility the new CEO can shake up Twitter.
Where next for Twitter?
Twitter does need to change. It is a massively popular platform that has a huge influence. Yet, it has lagged rivals in growing and monetizing its users. Twitter at its heart is a micro-blogging platform. The trouble is that it’s hard to splice advertising — social media’s biggest revenue source aside from data sharing — into the basic Twitter feed. Single promoted tweets are easy to scroll past, but adding too many will ruin the user experience.
Twitter plans to get users to pay more for the service. It is introducing subscriptions to ‘super follow’ user accounts. Super followers will get exclusive content, enhanced by the decision to allow videos to run longer. The live chat listening feature ‘Spaces’ will also play into this plan, sharing longer-form content via newsletter. Twitter want to form communities around a particular interest. These types of changes should make advertising and promotions easier to place. Then there is Twitter Blue, a $3 per month Twitter account with additional features.
These are big plans that could change Twitter dramatically. Perhaps they can get lots of new users and double revenues as hoped. But, judging by the Twitter share price action, in my opinion, investors still don’t seem confident the company has the leadership to pull it off.