OVERVIEW
8-k out after the close. $2B buy-back previously authorized, but now commencing this quarter. Also, the board is proposing to eliminate the staggered structure.
Ned was asked about the repurchase program on the earnings call last week, and he said they were evaluating but thought flexibility was important. Clearly, the stock drop post-earnings changed things.
From our conversations with investors… most think the drop post-earnings is an overreaction given the strong rev performance, but no one wants to step in before the election. The MAP delay also triggered investors.
https://www.sec.gov/ix?doc=/Archives/edgar/data/1418091/000141809120000206/twtr-20201102.htm
Activist involvement is moving things in the right direction on governance.
Also from the 8-k... Board is endorsing the current management structure and operating plan. They also continue to work on CEO succession plans and emphasize they will continue to evaluate performance closely.
What is going on?
The board is giving management a shot to turn the ship. We understand investors who have been involved in the name for a long time are out for blood, and most want to see Jack go. However, turning a ship of Twitter’s size doesn’t happen overnight… especially during a pandemic storm.
Keep in mind.
1) Management only prioritized revenue durability at the beginning of this year,
2) Activist only became publicly involved in the Spring of this year, and
3) COVID hit in March.
The company is hosting an investor day in February 2021. Let’s see where they are 12-months from now.
Plan B… Management change or “strategic alternatives” are options if they aren’t making meaningful progress on MAP, direct response, and attracting SMB advertisers by this time next year.
For now, Plan A is the path of least resistance. Give management one last chance to figure it out. Especially since it appears they have been cooperative.
Meanwhile, a focus on CEO Succession means the board is working to ensure the structure is in place for a smooth transition if it comes down to that. Twitter’s 2021 annual shareholder meeting should be held around May 2021 and will include a recommendation to eliminate Twitter’s staggered board
Please call or e-mail with any questions.
Andrew Freedman, CFA
Managing Director
@HedgeyeComm
203-562-6500
