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Twitter Stockholders Want Board to Consider Sale to Users

4 minute read
Virginia Backaitis avatar

Activist shareholders made a proposal to Twitter's board of directors last Friday: consider selling the platform to its users. 

A Securities and Exchange Commission proxy statement published last Friday, and signed by Twitter CEO and co-founder Jack Dorsey, revealed shareholders fear the platform's future is at stake. It calls for Twitter's management team to hire a consultant to examine the "nature and feasibility of selling the platform to its users."

"Stockholder Proposal 4," as it is called, proposes the consultant conduct a study into the feasibility of the option and make the resulting report available to stockholders and investors by Oct. 1, 2017. 

'We Are Twitter'

The filers, stockholders James McRitchie (lead filer) and Steffen Sauerteig (co-filer) are not alone in making this request. A group calling itself "We Are Twitter" has launched a petition campaign asking shareholders to vote "yes" on this "modest but radical proposal" to study Twitter's exit to "democratic user ownership." 

The group has collected more than 3500 signatures to date. Twitter's annual shareholder meeting is scheduled for May 22. 

Jack Dorsey and Twitter's board have included a response to "Stockholder Proposal 4" asking shareholders to vote "no," claiming it would yield "misallocation of (Twitter's) resources and a distraction to our board of directors and management." 

Misallocation of Resources? 

The proxy statement also revealed details into how Twitter allocates its resources, especially when it comes to executive compensation. The statement disclosed former COO Adam Bain received more than $29 million in compensation and current COO/CFO Anthony Noto more than $23.8 million. 

To put this in perspective, Microsoft CEO Satya Nadella's core pay is $17.7 million, GE CEO Jeff Immelt's totals $21.3 million, Amazon CEO Jeff Bezos' is $1.1 million and Apple CEO Tim Cook receives $8.7 million. 

Dorsey, in comparison, direct compensation totaled $56,551 in 2016, exclusive of salary, bonus and stock and option awards.

On Friday, Twitter's stock closed near an all-time low of $14.29, making it hard to argue that the C-suite had used shareholders money wisely. 

Learning Opportunities

Though expected, the filing also included the news that Peter Fenton, long time Twitter board member and, at one point one of Twitter's top five investors (through Benchmark Capital), is leaving the company's board. 

Co-Founder Ev Williams Sells 

Last week, in a separate regulatory filing, it was revealed that Twitter co-founder and board member Ev Williams had set up a 10b-1 trading plan to liquidate up to 30 percent of his stake in Twitter. 

In a statement on Medium, where Williams is CEO, he indicated his decision had nothing to do with Twitter's performance. 

"It actually pains me to be selling at this point, but this sale is all about personal context, not company context," he wrote, adding the money would provide him with the liquidity needed "to enable other people to do good things." 

Will Stockholders Turn Twitter Into a Co-Op? 

The proposal set forth by McRitchie and authored by members of "We are Twitter" argues: 

"A community-owned Twitter could result in new and reliable revenue streams, since we, as users, could buy in as co-owners, with a stake in the platform's success. Without the short-term pressure of the stock markets, we can realize Twitter's potential value, which the current business model has struggled to do for many years. We could set more transparent accountable rules for handling abuse. We could re-open the platform's data to spur innovation. Overall, we'd all be invested in Twitter's success and sustainability. Such a conversion could also ensure a fairer return for the company's existing investors than other options." 

The proposal comes at a time when the social media site faces increasing criticism for the unchecked presence of robots and trolls on the platform. While the company has slowly rolled out updates to curb abuses, the measures have been viewed as too little too late, with potential buyers allegedly being scared away in the meantime. 

The recent release of social media platform Mastodon, which boasts the tag line "Like Twitter, Without Nazis," is yet one more indication of users' frustration with the platform. 

A user-owned Twitter is a nice, idealistic idea that might be worth exploring given that Twitter's management team has yet to come up with anything that works..