Square and Twitter Need to Dump CEO Dorsey

Technology

Published: May 7, 2016 9:10 am

Last Updated: January 13, 2020 9:45 am

Jack Dorsey is chief executive officer of both Twitter Inc. (NYSE: TWTR) and Square Inc. (NYSE: SQ). His primary job has been to turn around the two floundering companies. Some investors believe he should hold only one of the jobs. He has done so poorly that he should hold neither.

Square creates tools to help businesses sell products and services and to help small businesses get financing. It announced horrible earnings, which dropped its stock price 22% to $10.22, against a 52-week range of $15.91 to $8.06. Square’s shares have fallen 31% this year.

In Square’s most recent quarter, revenue rose to $379 million from $251 million in the same period a year ago, but the company lost $96 million. A large portion of the shares owned by insiders will be available for sale when the post-IPO lockup period ends. Some of these insiders will sell, particularly if they are pessimistic about Square’s prospects. The theory behind the drop in share price also includes slowing revenue and the question of whether its business model will ever allow it to be profitable.

Twitter’s problems are more severe. Its user base has stopped growing, and it has not been able to tap online markets and increase its sales. Its average monthly users rose only 3% to 310 million in the first quarter, compared to the same quarter last year. Revenue rose from $425 million a year ago to $596 million, but Twitter lost $78 million in the quarter. Its outlook for the current quarter was ugly.