Twitter shares: where next as top hedge fund takes $1 billion stake

We examine the potential implications/ intentions of Elliott Management’s reported US$1 billion stake in the social media giant.

News that activist hedge fund Elliott Management had acquired a 5%, roughly US$1 billion stake in Twitter (TWTR) broke late last week. The response from the market was swift: with Twitter seeing its share price rise over 12% in the last two trading days.

Yesterday alone the stock climbed 7.89% finishing out the session at US$35.82 per share.

Mind you, Elliott Management’s intentions aren’t friendly; at least not if you’re Jack Dorsey.

The hedge fund, founded by legendary activist investor Paul Singer, is looking to oust Twitter’s CEO. The fund 'has nominated four directors to Twitter’s board'; though there are only three seats available during the company’s next annual meeting, according to Bloomberg.

‘Twitter has been a potential target for activist investors for years. The company only has one class of stock, which means co-founder Dorsey doesn’t have voting control of the company like Facebook Inc.’s Mark Zuckerberg or Snap co-founders Evan Spiegel and Bobby Murphy,’ Bloomberg added.

Ultimately, Elliot Management believes that Twitter requires a full-time CEO. Mr Dorsey by comparison, currently splits his time between two CEO positions: one at Twitter and the other at the US$35 billion payments company Square.

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Other thoughts and feelings

Jim Cramer, the finance television personality, looks to have sided with Elliot Management, saying:

‘I think the best thing he could do for his shareholders is just retire as CEO of Twitter and focus on running Square full time – or vice versa.’

By comparison, Elon Musk today tweeted his support for Mr Dorsey, saying:

‘Just want to say that I support @jack as Twitter CEO.’

Twitter share price: where next?

Regardless of who supports who, a number of analysts have already began revising their research on Twitter in the wake of this planned activist attack.

According to Bloomberg Data, Twitter currently has an average 12-month price target of $36.07; which at present would imply scant upside for investors.

In the last year the Twitter share price has performed solidly, rising ~17% in that period. In saying that, its run has been marred by volatility: in September 2019 TWTR stock traded as high as $45 per share. By November, it had dropped as low as $29 per share.

Watch this space.

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