Twitter Mostly Avoids Stock Market Carnage After $1 Billion Silver Lake Deal

Silver Lake will help Twitter fund a $2 billion share repurchase program.

Chris Ratcliffe/Bloomberg

Chris Ratcliffe/Bloomberg

Private equity firm Silver Lake Management will invest $1 billion in Twitter to help buy back its shares over time, an agreement made in cooperation with activist hedge fund firm Elliott Management Corp.

The social media company plans to use the investment and cash on hand to fund a $2 billion share repurchase program, according to a Twitter statement Monday morning. Silver Lake’s co-chief executive officer Egon Durban and Elliott partner Jesse Cohn will become Twitter board members.

Shares of the social media company jumped on the news, while the rest of the stock market was tanking on concerns tied to the coronavirus and a plunge in oil prices. Twitter’s stock price remained up in the afternoon before sliding to $32.94 around 3:15 p.m. on the New York Stock Exchange, down about 1.55 percent.

Twitter is strengthening its board “in an environment where certainty is scarce,” Patrick Pichette, lead independent director of the board, said in the statement. He said the board has created a temporary committee to help evaluate the company’s leadership structure.

Elliott, which has built a stake in Twitter, has been pressuring the company to remove its co-founder and CEO Jack Dorsey, a source familiar with the matter told Institutional Investor about a week ago. Twitter said Elliott holds 4 percent of its common shares and equivalent economic interests.

“We are deeply proud of our accomplishments and confident we are on the right path with Jack’s leadership and the executive team,” Pichette said. “As a board, we regularly review and evaluate how Twitter is run, and while our CEO structure is unique, so is Jack and so is this company.”

[II Deep Dive: Silver Lake Preps Expansion With Leadership Shake-Up]

Beyond Durban and Cohn, Twitter’s board is seeking a third, new independent director with deep expertise in technology and artificial intelligence, Pichette said. Silver Lake, which focuses on technology deals, will help Twitter accelerate growth and product innovation, according to the company statement.

The social media company aims to increase its monetizable daily active users at a rate of at least 20 percent in 2020 and beyond. More details about its growth ambitions, including its share of digital advertising, will be shared at its analyst day later in the year.

“Twitter serves the public conversation, and our purpose has never been more important,” Dorsey said in the statement. “Silver Lake’s investment in Twitter is a strong vote of confidence in our work and our path forward.”

Silver Lake has also agreed to purchase $1 billion of its 0.375 percent convertible senior notes due in 2025, according to the statement.

Neither Silver Lake nor Elliott will comment on or influence Twitter’s policies, rules or enforcement decisions, Twitter said, citing terms of its cooperation agreement.

The rise in Twitter’s shares was a sharp contrast to U.S. stocks, with the Standard & Poor’s 500 index down almost 7 percent in late afternoon trading on Monday. U.S. equity markets had earlier halted trading because of the steep sell-off, with the New York Stock Exchange pointing to the “market wide circuit breaker” in a tweet Monday morning.