This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe
Monday, April 18, 2022
Excuse me while I take a brief trip down memory lane before I drop the hammer on the topic du jour — Elon Musk’s battle for Twitter.
Prior to my time at Yahoo Finance when I was leading the charge at TheStreet (pre-2018), I booked a work-related tour of California. It’s customary to do this quickly when getting put into these types of leadership jobs — it’s important to meet employees face-to-face, hear their ideas and concerns and then start building an attack plan that rallies the troops. And when it comes to news leadership jobs — particularly in business news — it’s often good to meet leaders at large companies to introduce yourself and “get more on their radar” so to speak.
So that’s what I did. I met with executives at Apple (hell of an HQ campus). And then I ended my tour with a stop at Twitter’s San Francisco headquarters.
I was beyond pumped to walk around Twitter’s mecca. I had been on the platform since 2010, and definitely understood their role in society and where it would likely head over the next decade. Per my standard operating procedure, I arrived at their HQ very early. I walked in and I was ushered to sign in on a tablet. I then sat down on a plush couch in what was one of the most impressive looking waiting rooms I had ever seen.
I thought it was odd I didn’t see any hustle and bustle of people — I had imagined being bumped into by frenzied coders guzzling $12 green juice drinks all screaming out “must obliterate trolls and bots!” Alas, no go.
The person I was there to meet came and we began the tour of the office. First stop: the coffee bar, where a barista made me a chai tea latte with a froth design. It tasted great, but I still didn’t see many people and there was just an energy missing in the building.
With a fancy chai tea latte in hand, I walked by what appeared to be a small game room (it was empty). We then proceeded to sit inside a mini log cabin (yes, inside the office) and talked shop for a bit. About 45 minutes later, my chai tea latte was done and I headed out the door, back en route to my office in New York City.
I find myself reflecting back on that experience today.
My takeaway from that brief time at Twitter’s HQ was that here is a company that is playing a key role in all walks of society and yet it was missing a buzz. I have held that quizzical view on Twitter ever since that day — a company that has simply not lived up to its potential from a societal standpoint but also as a public company.
Since that meeting, why have so many people left Twitter (I hear the indecision on key matters has long been an issue)? Why does the platform largely look and work the same as when I visited several years ago (and first joined in 2010)? Why am I not paying for Twitter? Why does the search function suck? Why are there gazillions of inactive accounts on the platform? Why is there content on the platform that would blow your minds if you saw it? Why do bots still tweet at me?
These are a few of the thoughts I have batted around on Twitter.
I would argue this lack of leadership and execution at Twitter have shown up in the financial results. Here are some fast facts from the Bloomberg Terminal.
Twitter’s five-year average revenue growth rate is +16%, compared to Snap’s +87% and Meta’s +34%.
Twitter’s annual EBITDA margin (operating margin) has dropped close to 900 basis points since 2018. Meanwhile, Snap’s has gone to -12.5%, down from -96.2% (an improvement) and Meta’s is down 460 basis points (relatively outperforming Twitter).
The bottom line is that Twitter has been a disappointing public company and needs to be in the hands of a true visionary like Musk. Musk is the type of leader — for all his faults — that would light a fire under Twitter for the first time, maybe ever.
I am sure Musk has a vision for Twitter. Even if he doesn’t have a complete vision at this moment, just his presence as a globally renowned change agent owner may unlock big important ideas being held up by Twitter’s notoriously slow decision-making process.
Twitter CEO Parag Agrawal, who has been there for more than a decade, isn’t going to light that fire. Agrawal barely owns any shares of the company (ditto for other Twitter board members as Musk called out this weekend on Twitter and as you can see below). That is terrible, especially for a new CEO. On day one, Agrawal should have opened his digital checkbook and bought a large slug of Twitter’s stock as a show of confidence in his turnaround plan.
When Agrawal was appointed CEO in place of Jack Dorsey on Nov. 29, 2021, the stock finished the session down 2.74%. Shares opened the next day at $45.51 and then went on to close at $33 on March 7 despite the company still saying it can double revenue by 2023.
Twitter priced its IPO at $26 a share in 2013! Give me a break — we have been in the golden age of tech the past decade and yet Twitter’s stock isn’t too far away from its IPO price? That’s laughable! Snap’s stock has surged 155% in the past two years compared to the 68% rise for Twitter.
The price action is a total vote of no confidence in Agrawal’s leadership and the board’s ability to be the stewards of creating value for shareholders.
So I encourage Twitter’s leadership and board to put down the fancy green tea lattes for once, swallow some pride and extend a hand to Musk. Get to $60 a share (the magic number I hear will get a deal done) and venture off into the portfolio of Musk. It’s where Twitter needs to be at this point in its lifecycle.
What to watch today
6:00 a.m. ET: Synchrony Financial (SYF) is expected to report adjusted earnings of $1.54 per share on revenue of $2.70 billion
6:30 a.m. ET: Bank of New York Mellon Corp. (BK) is expected to report adjusted earnings of 86 cents per share on revenue of $3.96 billion
6:45 a.m. ET: Bank of America (BAC) is expected to report adjusted earnings of 74 cents per share on revenue of $23.24 billion
8:45 a.m. ET: Charles Schwab (SCHW) is expected to report adjusted earnings of 84 cents per share on revenue of $4.81 billion
Yahoo Finance Highlights