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Twitter Bid: Musk and Dorsey Form Unexpected Alliance

Two billionaires who admire each other have launched separate attacks against the board of Twitter. One of them co-founded the site. The other wants to buy it.
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Elon Musk and Jack Dorsey appreciate each other and do not hide it. You could even say they are buddies.

The two billionaires have many things in common. They are both bitcoin evangelists. Tesla  (TSLA) , the electric-vehicle maker co-founded and run by Musk, has 43,200 bitcoins on its balance sheet, at last check valued at $1.71 billion, according to Bitcoin Treasuries. Block  (SQ) , the fintech formerly known as Square and founded by Dorsey, on its balance sheet holds 8,027 bitcoins valued at $317.3 million.

Musk and Dorsey are also serial entrepreneurs. The former co-founded PayPal  (PYPL)  and Tesla and founded SpaceX. The second founded Twitter and Block. They have both gone through difficult times when they headed their respective companies, and it is in these times that each has been able to count on the support of the other.

Dorsey was one of the few CEOs to back Musk amid strained relations with the Securities and Exchange Commission.

Musk and Dorsey: Friends in Hard Times

"Ok, then WHO is the most exciting influential on Twitter right now? BE SPECIFIC," journalist Kara Swisher asked Dorsey on February 2019.

"To me personally? I like how @elonmusk uses Twitter," Dorsey answered. "He’s focused on solving existential problems and sharing his thinking openly. I respect that a lot, and all the ups and downs that come with it #karajack."

"Thanks Jack, Twitter rocks! 🤡😎🌪💩🔥🥜💨🍃💫🚀🥰," Musk commented.

Musk returned the courtesy when Dorsey quit Twitter last November as the activist fund manager Elliott Management pressured the platform to increase its monetizable users and revenue.

The richest man in the world notably posted on Twitter a meme showing Parag Agrawal, who succeeded Dorsey as Twitter CEO,  in the clothes of the Russian dictator Joseph Stalin and Dorsey as Nikolai Yezhov, the former head of the Soviet secret police.

Maximum Pressure on the Twitter Board

Now Musk and Dorsey seem to have a common target: Twitter's board. Dorsey is a member of the board until May. He had indicated last November that he was giving up his seat as a director at the same time as that of CEO. So it's uncertain whether he has taken part in board meetings since November.

It all started on April 4 when Musk disclosed that he had a 9.2% stake in Twitter, making him one of the biggest shareholders. Musk explained that he wanted to make significant changes to the platform. 

A surprise deal had been reached with management and the board under which Musk would limit his stake in Twitter to no more than 14.9% of Twitter by 2024. In exchange he'd get a seat on the board, starting April 9. 

But the tech tycoon then rejected the deal and on April 14 launched a hostile bid of $54.20 a share for all of Twitter, valuing the site at $43 billion. The board met the same day and said on April 15 that it was putting in place a poison pill, a mechanism designed to make a hostile takeover prohibitively expensive.

Since then, Musk has launched a campaign on social media to win public support for his bid. And Musk and Dorsey have just opened another front: denouncing the board, claiming it is inept. 

This board is studying Musk's offer, but given the adoption of the poison pill, it doesn't seem to want to accept it.

"If look into the history of Twitter board, it’s intriguing as I was a witness on its early beginnings, mired in plots and coups, and particularly amongst Twitter’s founding members. I wish if it could be made into a Hollywood thriller one day," one Twitter user wrote on April 17.

To this comment, Dorsey responded with a post denouncing what he called the Twitter board's dysfunction.

"It’s consistently been the dysfunction of the company," the former Twitter CEO said.

A user then asked him if he was allowed to say so since he is still officially a board member. Dorsey replied, "No."

Dorsey also endorsed a post quoting venture capitalist Fred Destin as saying: "Silicon Valley proverb" Good boards don't create good companies, but a bad board will kill a company every time."

"Big facts," the businessman commented.

For his part, Musk has indicated that if he takes control of Twitter, board members would receive compensation equal to $0.  

"Board salary will be $0 if my bid succeeds, so that’s ~$3M/year saved right there," he said on April 18. 

On April 17, he said that the interests of the board were not aligned with those of the shareholders, since the directors, except for Dorsey, did not hold Twitter shares.

"Wow, with Jack departing, the Twitter board collectively owns almost no shares! Objectively, their economic interests are simply not aligned with shareholders," the billionaire said.

Pressuring the board: That's the effort of the two billionaires, who have always presented themselves as two outsiders of Silicon Valley and of the system they have decided to disrupt.