On Monday it was reported that interim Twitter (TWTR) CEO Jack Dorsey had bought close to $900,000 worth of the stock on August 7th, at what was a the time of the buy an all time low of about $27.70 (here). The stock caught a bid on the announcement which helped fuel speculation that the former & interim CEO would soon be named in some way shape or form the permanent leader. Early TWTR investor, and quasi current activist in the stock, Chris Sacca said in a podcast with Re/Code’s Kara Swisher this week that he thinks that Dorsey should be the CEO. That was amongst other interesting observations including his view that many of the company’s problems seem to be “self inflicted”. I Tweeted out the link to the entire podcast if you want to give it a listen:
Great stuff by @karaswisher. My guess: @sacca likely to be on $TWTR board soon, @jack will be ceo & cfo will be out. https://t.co/T5GDB2HlWY
— Dan Nathan (@RiskReversal) August 12, 2015
Suntrust’s TWTR analyst Bob Peck, who has been stellar on the stock (he downgraded it from Buy to Hold at $50 prior to Q1 results in April) said just this morning that the CEO announcement will be soon and likely be Dorsey:
SunTrust’s @bpeck says a Twitter CEO announcement is “imminent” (via @sallyshin) $TWTRpic.twitter.com/jUPH0uCx2J
— Carl Quintanilla (@carlquintanilla) August 14, 2015
It’s my sense this announcement would be viewed negatively by investors and the stock would give back this week’s gains. One reason is that the company will not be in the mood to sell themselves with sentiment so poor and in the midst of a management led overhaul. The other reason is investors know Dorsey already and any hopes for an outside news making hire would quickly come out of the stock.
I am long Twitter, as I continue to believe that the importance of the platform in real time news, discussion and search, coupled with its scarcity value in the social media and mobile messaging landscape is not adequately reflected in the company’s current value. Nor is it truly represented in the current lack of growth in monthly active users. Obviously there are some very smart people at Twitter and they’ve been thinking hard about these issues, but as an outsider it often amazes me how simple solutions to some of their most persistent issues take years to address. That has to change if the company ever wants to take full advantage of the opportunity in front of them.
The stock has been prone to nasty gaps on bad news where investors shoot first and ask questions later, I suspect a messy announcement trying to explain a confusing new management structure would cause a similar gap lower, possibly to its IPO price of $26.
But at that point I am hard-pressed to think there are many holders left to sell. And this announcement shouldn’t catch anyone off guard. Maybe those who have been holding and waiting for a take-out or some amazing CEO hire, but most else is already in the stock and sentiment probably couldn’t get much worse.
I remain long shares of TWTR and will likely do so until there is a new adverse fundamental reason to sell, at this point I believe most of the bad news is in the stock.