Good for Jack, and I suspect good for Twitter. In a larger context, the Twitter CEO saga offers a cautionary tale for CEOs about the timing of any public offering, and perhaps more fundamentally, the wisdom of being a public company at all.
Regarding timing, I marveled day in and day out about the public conversation regarding the senior leadership at Twitter. Anchors at CNBC and Bloomberg TV devoted entire segments to the right choice. Sell side analysts, portfolio managers, market strategists plus an endless variety of pundits weighed in not only on who the CEO should be, but what s/he should do once they assume the throne.
How can a company operate effectively under such a microscope?
And this microscope is not just background noise and infotainment. What should a director do if s/he is told by a large institutional investor: “Jack’s in or we’re out,”? Or what if a sell side analyst writes, “At this vital inflection point in the company’s development, we would be constrained to remain constructive on TWTR shares should the C-suite at Twitter consist of anything less than a full time CEO”?
Of course, all this will come to pass. Whatever the result, the crucible in which the decision was made will be the fulcrum upon which the company’s future success or failure will rest. And further, it will serves as the precedent for all other companies in similar circumstances.
And that brings me to the notion that public ownership is not for every company. For years I consulted to a company engaged in viatical settlements. When they filed for an IPO, 22 states attorney generals rose up in unison and sued the company.
My client didn’t violate any laws. But viatical settlements were controversial. Paying a dying man $50,000 for a $500,000 life insurance policy rankled regulators. The optics were all wrong, even if an analysis of the underlying cashflows showed a 10-12% internal rate of return for the buyer.
The client withdrew their public company, and ultimately, achieved a $1.2 billion valuation as a private company.
But even if they pushed their public offering through, they would have struggled as a public company because, in addition to controversy, the business model was difficult to understand, and there were no comparables.
And in the face of these twin challenges, no amount of investor or public relations, no matter how expertly crafted and executed could meaningfully prevail.
As I like to remind my clients who aspire to an IPO, going public is one thing. Being public is quite another.