Twitter Board Confident In Leadership Structure Post Review; Shares Rise

Twitter announced that a board committee created earlier this year to evaluate the social media giant’s leadership structure recommended that the current management structure should remain intact, including its CEO Jack Dorsey. Shares are advancing 1.7% in Tuesday’s pre-market session.

In an SEC filing, Twitter (TWTR) said that the committee expressed its confidence in the current management structure, the new operating plan and procedures put in place by CEO Dorsey, as well as the company’s “significantly improving product, operational and financial performance through the most recently reported quarter.”

Back in March, an independent committee was formed to formally evaluate Twitter’s leadership, board structure, and CEO succession plan, as part of a cooperation letter agreement with activist investor Elliott Investment Management. The committee, which included Elliott Investment and Silverlake representatives, also recommended an amendment to shorten the term of directors to 1 year from 3 years. Meanwhile, directors who have multiple-year terms will continue to serve those terms until they expire.

In addition, Twitter announced that it will reinstate its previously-authorized $2 billion share repurchase program this quarter. The share buyback plan is part of the agreement reached with Elliot Investment, which earlier this year tried to oust Dorsey amid concern that he is serving as CEO of two public companies. Dorsey is also CEO of payment platform Square.

The decision comes just after Twitter last week reported better-than-expected 3Q results as advertising revenue jumped 15%. The social media giant’s sales of $936 million increased 14% year-over-year and came ahead of the Street’s estimates of $777 million. Third-quarter earnings of $0.19 per share topped analysts’ estimates of $0.06 and grew 11.8% from the year-ago quarter. Twitter’s monetizable daily active users (mDAUs) increased by 29% to 187 milion year-over-year, but fell well short of the consensus estimate of 195 million.

In reaction to the earnings results, Citigroup analyst Jason Bazinet raised the stock’s price target to $42 from $36. However, the analyst maintained a Hold rating saying that going forward he sees a “more limited user growth runway” for Twitter. (See Twitter stock analysis on TipRanks).

The rest of the Street shares Bazinet’s outlook on the stock. The Hold analyst consensus shows 22 Holds and 1 Sell versus 5 Buys. With shares up 23%, the $ 46.50 average price target implies 18% upside potential over the coming year.