Jack Dorsey leaves Twitter after six years in the job

Jack Dorsey leaves Twitter Inc. after his heralded return in 2015, but it wasn't good enough for Wall Street, which puts high hopes on the incoming chief executive.

On Monday, Dorsey stepped down as Twitter CEO TWTR, after an early report by CNBC. The news on Twitter's core service, where he made a cryptic statement about founder-led companies, a practice he said is severely limiting, and said he has worked hard to make sure Twitter can break away from its founding and its founders.

It was a strange statement from Dorsey, who has spent the past six years as CEO of both the large public companies he founded, Twitter and Square Inc. SQ, after finagling his way back into the top seat at the social network in 2015. The company paid $2 billion less than two years ago to investors, to keep Dorsey in his part-time job.

See also: Crypto community ponders Jack Dorsey's next move.

Dorsey has made a lot of changes in his years back at the top of Twitter - and especially since the March 2020 deal with activist investors. While he has improved the product of Twitter, the company has not seen the expected growth in users, advertising revenue or stock price, while social-media rivals have soared.

Since Dorsey resigned to the CEO job on June 12, 2015, Twitter's stock is up 27.5%, while the S&P 500 SPX has increased 117.9% over the same period. Since its stock-repurchase deal with Elliott Management in March 2020, Twitter's shares are up 41%, while the S&P is up 67.3%. Facebook is calling itself Meta Platforms Inc. FB, rose 99.4%, Snap Inc. SNAP increased by 326.6%, and Pinterest Inc. PINS increased by 150.1%.

Wall Street is gripped by the fact that Twitter can't capitalize financially on its importance, and the uncertainty shown in Monday s trading. Initially, Twitter's shares went up nearly 11% on the news that Dorsey was stepping down, but closed down nearly 3% at $45.76.

Mark Mahaney, an analyst with Evercore ISI, wrote in a note that the company has faced a customer-value proposition challenge, especially with its marketer advertiser customers. He believes that Alphabet Inc.'s GOOGL, GOOG, Google, Facebook, Pinterest and Snap all have better direct-response marketing tools for advertisers, and that brand advertising still accounts for the majority of Twitter's ad revenue.

From 2017: The Dorsey divergence — As Twitter stalls, Square is still in high growth mode.

It is a bit tricky to look back at Twitter's user growth during Dorsey's most recent tenure, because in 2019 the company made an Apple Inc. AAPL, like move, and phased out the reporting of monthly active daily users. In the most recent quarter, it reported 211 million daily active users, a rise from 145 million in the third quarter of 2019 based on so-called monetizable daily active users.

Despite the fact that monetizable data is not much better, despite the fact that it eliminated the company's declining monthly active user data. Third-quarter numbers of 211 million users went up 3% on a year-over-year basis, and the performance trailed user and advertising targets that Dorsey set for the company.

In a note Monday, Mizuho Securities analysts wrote that Twitter is behind schedule in mDAU mobile daily average users 20% CAGR and DR direct response targets 50% of revenues established during Analyst Day.

The analysts believe that incoming CEO Parag Agrawal, who has been the company's chief technology officer, and Salesforce.com Inc. CRM, President Bret Taylor, who will take over the chairman role, will be able to address the company's nagging growth issues.

Who is Agrawal, the new CEO of Twitter?

The hedge fund that led the campaign to remove Dorsey said in a statement that they are the right leaders for Twitter at this pivotal moment.

With Agrawal s chops as a techie, investors now have the peace of mind knowing that the CEO is working full time on Twitter and does not have his attention diverted by a second company. There is plenty beyond just user and revenue growth for Agrawal to focus on, including the cultural conflict reported in the New York Times this summer.

Dorsey leaves a hard road for Agrawal, who will struggle to make big changes in the company's results soon. It didn't look like Dorsey was going to be able to provide the kind of growth Wall Street wants anyway, so he will let someone else take a shot on Twitter for a second time.