Jack Dorsey's Fail Whale: Twitter hits a new stock low
Let’s all pause and have a nice Internet slow clap today for Chris Sacca.
The concern-trolling Twitter investor who Dick Costolo helped make extraordinarily wealthy when he increased Twitter’s valuation by some 30x in just five years. The Chris Sacca who thanked Costolo by publicly attacking him— in the nicest “bro, I BLEED AQUA” way— until, ultimately, Costolo left.
Sacca wasn’t the reason Costolo stepped down, but he was certainly part of the public narrative that lead to it. And it was behavior I’ve never seen from an early stage investor before.
As I wrote at the time:
He presents as a classic VC/ angel investor, but he’s never built a company himself, and he made his fortune buying and selling shares of Twitter as it went up. A move he tried to pull with Uber-- and one that got him unceremoniously banned from the company’s inner circle. He’s not a creator; he’s an arbitrager.
That isn’t necessarily a bad thing. It takes all types to make capitalism work. But most VCs will tell you to call the companies they invested in where things haven’t gone well if you want an honest assessment of how they behave when the shit hits the fan. In the case of Sacca, it’s worth noting the status of his relationships with the companies where he made the most money. One he publicly criticized in a relentless “concern trolling” campaign, and the other won’t speak to him.
So, how’d that work out?
Following Costolo’s departure, Twitter founder Jack Dorsey stepped back in as CEO. After Twitter posted decent quarterly results last Monday, Dorsey opened his mouth on an earnings call and apparently forgot he was charge of a multibillion dollar public company where jobs and livelihoods were on the line. A dramatic sell-off has been happening in the stock ever since, closing yesterday under $30 a share— the lowest level Twitter has ever traded at. (Business Insider has helpfully collected a list of all the quotes that spooked investors here.)
Yeah! Good riddance, Dick Costolo! And well done, Chris Sacca!
Better than a slow-clap, let’s give Sacca one big Internet Picard Face Palm. Appropriate, given the actor who played Picard was one of the ones who rang Twitter’s opening bell. That was back when being called “The Anti-Facebook” was a compliment because Twitter ran a comparatively buttoned up and successful IPO process.
There are so many things that should have seemed obvious about Twitter’s situation before all of this happened:
— For the billionth time, it doesn’t work to have one CEO running two companies. Steve Jobs and Elon Musk are the only examples of someone doing this successfully. And those have massive caveats: Musk has admitted it isn’t sustainable, and Jobs was very hands-off at Pixar. Neither Square nor Twitter can afford a hands-off or even remotely distracted CEO right now.
— Replacing a CEO rarely solves an underlying problem. It only puts the incoming CEO into more of a defensive crouch, which in turn means the company makes short term LET’S GET WALL STREET OFF OUR BACKS! moves that don’t really change anything. Costolo had a long-term plan to grow users. Maybe Wall Street didn’t like it. Maybe it was a horrible plan, but good luck hiring anyone into that mess who ever thinks long-term again. (See: Yahoo.)
— Twitter looks even more damaged than it did a week ago. And that’s saying something. As Kevin Kelleher wisely speculated in his piece last week, the hamfisted, Periscope’d earnings call may have been an attempt by Dorsey to throw Costolo under the bus or lower the price to pave the way for an acquisition. Either would be a dumb strategy. Because now Twitter not only looks broken, but it looks like like no one on staff has a solution.
There’s a lot of speculation over the last two days that traders are trying to drive the price down to spark a bidding war over the asset. But if that’s what’s happening, any rumors will only pop the price back up again. Meantime the employees get dragged through uncertainty and hell.
And the reality is even at $20 billion Twitter is still expensive. Anything over $10 billion is expensive. And to get all the way down to $10 billion, Twitter will have to look even worse to investors than it does now. And companies who can afford $10 billion assets don’t like to buy broken assets. Twitter is in the opposite of a Goldilocks zone.
Is Google better off paying $15 billion for a Twitter where Dorsey and uncertainty are driving out managers and taking a toll on the morale, or paying up $15 billion for a gamble on Snapchat? It’s increasingly hard to argue the former.
This sucks. I don’t want Twitter to sell, but the more worrying outcome is starting to become that it doesn’t sell and gets in a Yahoo crouch of defensiveness and uncertainty that lasts the rest of its days.