The CEO of Twitter, Jack Dorsey, is giving up more than $200 million of Twitter stock and sharing it with employees. This represents about one-third or 6.8 million of the total shares of Twitter owned by Dorsey.
Based on Twitter’s market value, Dorsey’s current 15 million shares are worth about $460 million. This may seem like a lot, but is a drop in the bucket when compared to the wealth of other online company CEO’s. Owning more than 82 million share of Amazon, Jeff Bezo’s net worth is more than $55 billion, making him the third-richest man in America as recently reported by the Inquisitr.
The gifting of shares by the CEO of Twitter is in direct response to the announcement last week of layoffs within the online messaging company, according to US News. Current employees will each receive their stake of the shares through a company incentive plan.
After Dorsey’s announcement to surrender stock, he went on to explain his reason via a tweet.
Dan Marcec, director of content and marketing communications at data firm Equilar, supported the CEO’s strategy by saying the move was intended “to instill confidence in investors and employees to show he’s trying to do the right thing for the company.”
Notwithstanding the announcement by the CEO of Twitter, company shareholders still have to approve the equity incentive plan, which will begin transferring the shares to employees in 2016. Twitter’s board, however, has approved the plan.
The generous gesture made by the CEO may fall flat should Twitter shares continue to drop. Despite closing up on Friday, Twitter shares have declined 44 percent in the past six months. Experts blame the stock price decline on Twitter’s sluggish user growth and its failure to make a consistent profit despite rising revenue.
In spite of Twitter, Inc.’s earlier decision to remove Dorsey from the CEO position, the board voted to bring him back as the permanent CEO replacing Dick Costolo. Dorsey returned to the company earlier this month with plans to re-tool the company and put it on the comeback trail.
Twitter’s 300-million subscriber base has slowed considerably since the company went public in 2013. Meanwhile, Facebook is only two years older and boasts a current user base over 1.5 billion. Dorsey, one of Twitter’s founders, hopes he can improve that by making the messaging service more appealing to users and advertisers.
After the announcement that Jack Dorsey would return as CEO of Twitter, the share price surged 4.5 percent. Steve Ballmer, former CEO of Microsoft, believes bringing Dorsey back was a good move by Twitter. Regarding the return of Dorsey as CEO of Twitter, “I had some faith that they absolutely could have the right guy come in as CEO,” Ballmer said in an October 23 interview with Bloomberg.
Ballmer recently purchased a four percent stake in Twitter, although he denies he knew Dorsey was taking the CEO position. According to Ballmer, his decision to purchase Twitter stock was predicated on the recent decline in the messaging company’s declining stock price and belief it has the ability to make a comeback. However, many took his purchase as a vote of confidence for the new CEO of Twitter.
Jack Dorsey, a co-founder of Twitter, has used this strategy before and has made gifts of stock in the past. Dorsey is also the CEO of Square, a payment processing company that is set to go public soon.
Over the last two years, Dorsey has given 15.1 million shares back to Square employees as well. Additionally, he has donated millions of shares to charity. He currently owns 24 percent of the company and is its largest shareholder.
The Twitter CEO’s gesture of returning stock to company employees may turn out to be a smart move. The gift is a strategic move to incentivize and retain key talent while boosting the company’s overall morale since the recent layoffs. The giving back of stock is only part of Jack Dorsey’s overall re-tooling plan for the online company.
Should the plan work, the CEO of Twitter may finally keep the company from continuing to flail while getting it back on track for long-term growth.
[Photo by Bill Pugliano/Getty Images]