Jesse Cohn has a new CEO in his sights.
Six months since Cohn, the 39-year-old deputy to billionaire Paul Singer at Elliott Management, took aim at AT&T, he's now going after Jack Dorsey with a stake in Twitter valued at more than $1 billion.
Insiders say that Elliott is looking to install a full-time CEO for Twitter instead of Dorsey, the founder, who also runs payment startup Square, and believes that governance and management changes would boost Twitter's share price.
Despite Twitter's high-profile use by celebrities and politicians, it has not enjoyed the same share price gains as much larger social media rival Facebook, these insiders point out.
Business Insider spoke on Sunday with several sources familiar with Elliott's campaign who pointed to numerous ways the hedge fund believes Twitter could improve its financial performance, including better monetizing its platform by providing users with easier access to ad-creation; onboarding new users in fewer steps; and stabilizing what's been a revolving door of company management.
Ultimately, though, the biggest thing Elliott and Cohn want is a full-time CEO, and that may very well mean Dorsey's exit, according to these people who declined to speak publicly because they were not authorized to discuss confidential discussions publicly.
As of Sunday, sources said Elliott had yet to reach Dorsey about its plans and that the hedge fund had no insight into his thinking. Later on Sunday, news emerged that Dorsey had cancelled plans to appear at the South by Southwest conference, with the company line stating coronavirus concerns.
Twitter declined to comment about Elliott's stake, which sources said is more than $1 billion, or between 4% and 5% of the company.
If history is any indication, Dorsey has a lot to consider as he stares down what will likely be a difficult week of deliberations with his board and Elliott, with Cohn, one of the most feared activists waiting to pounce with public campaigning against his employment if he puts up a fight.
A look at Cohn's past cases — and CEOs he has unseated — provides a glimpse at who Dorsey is up against, should he not decide to go quietly, though sources tell us that it may very well be a quick, amicable settlement.
Sources said there are two possibilities that could transpire: one, is that the parties come up with a resolution that saves face for Dorsey, ending with his resignation as CEO and moving on to run Square. If he and the board choose to fight, though, things could get ugly.
The 39-year-old Cohn — who is hooked on HBO's "Succession" — has been behind some of the ugliest shareholder tussles and boardroom battles in history during his 15 years at Paul Singer's Elliott Management.
His strategy of purchasing stock en masse and then demanding an overhaul of a company's business has provoked f-bombs from the Detroit businessman Peter Karmanos and paranoia from Athenahealth founder Jonathan Bush — the cousin of George W. Bush — that Cohn had him followed and photographed. Cohn's AT&T campaign in the fall led to the company agreeing to the hedge fund's demands in a little more than a month's time, and sent the company's stock price to a 52-week high at the time.
What you need to know about Jesse Cohn
From falling into finance as someone who didn't know what he wanted to do in his early 20s to becoming Paul Singer's attack dog on some of his most influential campaigns, Cohn has developed a reputation as a feared investor with the means to change America's blue-chip corporations.
Conversations with more than two dozen of his colleagues, competitors, detractors, and friends last fall, around the time of the AT&T campaign, also revealed an evolution. Cohn has developed a more diplomatic touch, as his targets have become larger and overhauls need approval by long-term shareholders, such as BlackRock, State Street, and Vanguard.
People close to Cohn have said has gradually developed relationships with these large Wall Street investors, who hold key votes in any contest over how a large company is managed.
Cohn almost didn't join Elliott
Fifteen years ago, Cohn almost didn't join Elliott.
After spending two years on Morgan Stanley's mergers and acquisitions team, Cohn began to look for hedge funds to join, accepting an offer from Elliott, which was then focused only on distressed situations. Cohn then later received an offer from a more "established fund," according to Ray McGuire, his boss at Morgan who is now a vice chairman at Citigroup.
It came as no surprise that Cohn had options.
Originally a native of the Long Island hamlet Baldwin, New York, Cohn was a computer whiz kid in his youth, attending programming camps in the summer and earning a certification from the software programmer Novell for his coding abilities before he could drive. (Years later, he pushed Novell to sell itself for more than $2 billion to Attachmate, where Cohn joined the board.)
He went to the Wharton School of the University of Pennsylvania, where he was a part of a literary society, and graduated in 2002, when he started working for McGuire and the prolific Wall Street dealmaker Paul Taubman at Morgan Stanley. There he helped make connections in the software and technology space that he eventually made his mark on at Elliott, sources previously told Business Insider.
At Morgan, McGuire said Cohn and fellow analyst Arta Tabaee, now a managing director at Clearlake Capital Group, were always around, constantly popping into his office with new ideas. McGuire described Cohn as fearless and "summa smart."
The idea of joining Elliott ultimately prevailed. After talking his decision over with McGuire, Cohn decided to stick with his gut.
"I think that was an early defining moment for Jesse, to honor his commitment," McGuire, who is still in touch with Cohn, told Business Insider last year.
In the subsequent years, the triathlon enthusiast would build Elliott's activism unit from scratch, with a focus and energy that is unnerving to opponents and endearing to colleagues. He finds it difficult sitting still at his desk and often needs to take a break to walk through Central Park, according to those who have worked with him, bringing colleagues with him to strategize about their next investment.
The birth of Elliott's activism
Cohn started Elliott's activism unit in 2005 with a small investment in the switch maker and Cisco competitor Enterasys Networks, which he pressured to sell, doubling Elliott's investment in the process.
The initial investment in Enterasys was only $15 million, but to Cohn, it was huge, according to people close to him. He took a shine to hunting down the inner details of a business, cold calling customers, employees, and engineers in the switch-making industry for insights. The company had loyal customers, but its products weren't reaching enough people, he concluded.
His career purpose began to take shape: He loved improving companies.
Soon, a whole swath of other small tech companies came in to Cohn's sights. He thought they had compelling products, but their stocks were underperforming. So he amassed stakes in their businesses, approached their management, and told them they were doing it wrong. Oftentimes, it wasn't pretty.
In 2006, Harry Knowles was the CEO of the bar-code systems maker Metrologic Instruments. After Metrologic underperformed that year, Knowles said Cohn approached him in an annual shareholder meeting and told him he would have to step aside and sell the company.
"He said, 'Hey, let me talk to you,'" Knowles told BI last year. "You don't have any choice."
Knowles, then in his 70s, thought he was getting old for the job. He cooperated with Cohn in selling Metrologic to the private-equity shop Francisco Partners and Elliott for $440 million. The newly installed owners hired another CEO to replace Knowles, who, in turn, fired Knowles' close friends and jettisoned business lines that relied on Knowles' personal involvement. The process was "painful," Knowles said.
It wouldn't be the last time Cohn's pressure on companies would contribute to the fraying of relationships among company management.
By 2012, Cohn set his sights on Compuware, a Detroit-based software company created by the former Carolina Hurricanes owner Pete Karmanos. Karmanos was on his way out of the company after ceding leadership and ready for a happy retirement. But after Elliott bought a stake and pressed for layoffs and cost cutting, he and his newly appointed CEO stopped getting along.
As Cohn bought more and more of the company's stock, multiple expletive-laced arguments broke out between Karmanos and his chosen successor, Bob Paul, over whether to cut costs, including his own retirement parties that would have cost $1.5 million and involved renting out the Detroit City Airport, according to a lawsuit later lodged by Karmanos against his fellow board members.
Karmanos' temperament soured more when Cohn ratcheted up the stakes and made a bid for the Compuware business as a whole at the end of 2012, phoning up Paul and telling him the bid would hit the press in 30 seconds, according to court documents.
After the board declined the bid, Karmanos told a crowd of several hundred people at a business conference that if he were still in charge, he "would tell the hedge fund to go f--- themselves," according to a lengthy account of the matter in the Detroit Free Press.
Testimony from board members in Karmanos' lawsuit detailed an aggressive approach by Cohn.
They said Cohn had thick files of personal information on each board member with details on which jobs their spouses had and schools their kids attended. He had the files laid out on a conference-room table when the board met with Cohn in Elliott's New York office. Karmanos has said he believed it played a part in intimidating his board into eventually selling.
Cohn's reputation as an attack dog intensified during his campaign against the healthcare-technology company Athenahealth.
A feature story in The New Yorker detailed his campaign last year against Athenahealth's former CEO Jonathan Bush, who said an anonymous Instagram user had taken pictures of him with a female friend and sent them to his wife. He wondered if Elliott was behind it — something the firm denies. Bush resigned from the company after a London-based reporter discovered details of domestic abuse in divorce filings from more than a decade ago.
Elliott has repeatedly denied the allegations in the lawsuit and past media reports on the firm's tactics, including any insinuation that it placed the story about Bush's history of domestic violence. But sources said the stories played to the firm's benefit. Boards and lawyers are reticent to fight a firm with Elliott's reputation. The stock price of companies Elliott takes a stake in often jump when a campaign is announced.
Cohn's ability to create change within an organization has been rewarded by Singer.
A couple years ago, Cohn paid $30 million for a penthouse in Manhattan's financial district that spans 6,000 square feet, according to media reports at the time.
What Twitter can expect
As part of its campaign on Twitter, Elliott has nominated four directors to serve on Twitter's board, though their identities have not been released publicly.
Whoever they are, insiders told us that Elliott's campaign against Twitter doesn't necessarily mean Dorsey's ousting, although they say it is one possible outcome.
One source familiar with the campaign said Elliott isn't "anti-Jack" but rather is pushing for a full-time CEO. And, although it's a remote possibility, the CEO could be Jack in a theoretical world, but it would require him leaving Square.
"He hasn't given any indication he wants to leave," one insider told us.
The tombstones of CEOs Cohn has racked up, though, certainly serves as a motivation for Twitter's board to come up with a settlement — and fast, some sources familiar with Elliott's tactics said.
One said he didn't think passive shareholders would support a CEO who has another job and is part of a staggered board — a governance structure that makes it difficult to replace management. And, this person said, that Twitter's board would see that action needs to be taken.
Elliott, more so than anyone else, has "gotten CEOs changed many, many, many times."