Twitter CEO Dick Costolo has sold more shares of Twitter stock, according to SEC filings.
This has upset at least one Twitter investor, who tells us over email:
“Selling stock speaks louder than any words. As the CEO, how do you look the employees in the eye when you are busy grabbing a lifeboat? He has lost their respect, and obviously the respect of the market. The people who work at Twitter know the potential, and they know he is an obstacle to achieving it. He shouldn’t be running the company anymore.”
You catch all that?
That Costolo has lost the respect of employees?
That “he is an obstacle”?
That “he shouldn’t be running the company anymore?”
The transaction that set this shareholder off was a sale in which family trust of Twitter CEO Dick Costolo sold 500,000 shares of Twitter stock worth $US5.32 million. This isn’t the first time Costolo sold shares this year. The trust no longer owns any shares of Twitter’s stock. It’s sold $US17 million worth of shares in the past few months.
Costolo still has 36,028 Twitter shares under his name, in addition to the 509,828 restricted stock that hasn’t vested yet, according to Bloomberg.
A Twitter spokesperson told us, “Dick has sold shares under a plan filed in the summer and his total sales represent less than 10% of his total equity in Twitter.”
Still, this sale is clearly turning heads and upsetting people.
It’s especially stunning because when the Twitter’s IPO lock up period ended, the company made a big deal about not selling any shares. In April, Costolo, via an SEC filing, said he would not sell shares. And yet, a few months later, Costolo set up a plan to sell shares for his family trust.
All year long, Twitter’s shares have been falling. The fact that he’s willing to sell while they are falling is a negative signal. It says that he doesn’t think the stock is going to be more valuable in the long run. If he did, he would be buying shares.
In February of 2011, AOL shares were falling. CEO Tim Armstrong spent $US10 million of his own money to buy more shares. That was a signal he believed in what his company was doing. His bet paid off. AOL’s shares have more than doubled since then.
Twitter shares have crashed 38% this year. Costolo should be buying not selling. If manages Twitter well, he could see an Armstrong-like doubling of his investment.
While Twitter wants to emphasise that this is less than 10% of his stake, the plain truth is that this is an unforced error. There’s no need for Costolo to sell shares.
All of this feeds into a larger, increasingly unflattering narrative about Costolo.
Earlier this year, Twitter COO Ali Rowghani was forced out of the company because Costolo wanted more control over the speed of the product. At the time, Twitter had just hired Daniel Graf from Google to run product. We were told that that Twitter believed in Graf. People at Twitter thought he was the right guy to run product.
But, just a few months later, Graf was demoted and Kevin Weil, a long-time Twitter executive was promoted to run consumer product.
Brian O’Malley, a VC at Accel, which owns shares of Twitter said the following about Costolo in August, “If someone’s gotten divorced once, you really don’t know who’s to blame … But if someone’s gotten divorced five times, there may be a pattern there.”
In other words, all the executive turmoil ties back to Costolo.
We don’t know what’s going to happen next with Costolo at Twitter, but the quotes from investors don’t look good for him. The executive turmoil doesn’t look good. The falling stock price is worrisome. The slow user growth is also a problem.
The irony of all this is that Twitter has long been rocked by turmoil in the executive ranks. Costolo has been a steadying influence. Until now.