Jack Dorsey fights Twitter freefall with employee giveaway

Twitter may be loved the world over by media types, but the company is still struggling to transform itself into something worthy of its once sky-high valuation of $36bn.

Jack Dorsey, Twitter’s newly reinstalled CEO, already made his mark by firing hundreds of staff. Understandably morale has taken a hit as the company, as Dorsey wrestles to turn it around.

Today Dorsey announced on Twitter he will give away 1/3 of his holding in the company to its remaining employees, which is worth around £128m today:

He explained his rationale for the move by saying he preferred “having a smaller part of something big, than a bigger part of something small”.

Dorsey’s strategy may well pay off and start a trend of founders giving away more equity to their employees. Tim Summers, founding partner in Tech City law firm Temple Bright told The Memo:

“This bold move from the Twitter CEO demonstrates a wish to cement the loyalty of a trusted team.

It sends a clear signal to the workforce that those who stay the course will be rewarded – in this case, at personal cost to the co-founder.”

Challenges for Twitter

Problem is, no matter the size, the outlook looks troubled for Twitter.

Prospects for the social network have stagnated since the heady days of 2010, when many believed Twitter would one day overtake Facebook in terms of users and eventually revenue.

The opposite happened. After its IPO, Facebook has continued to grow both in terms of users and revenue. In the UK alone, Facebook has almost 3.5 times more active users than Twitter and made an estimated £223m last year.

Unlike its stablemate Facebook, Twitter still makes losses. The number of people signing up to the social network has slumped, leading to questions about its future.

Morgan Stanley fanned the flames this week by downgrading their rating for Twitter’s stock.

Twitter needs to follow Facebook’s lead with new products to broaden its appeal. The social network can no longer survive on 140 character updates as its unique selling point.

By handing over shares to Twitter employees, Dorsey has bought himself time. Now he has to show the critics Twitter’s story is worth more than just 140 characters.