Jack Dorsey has too much on his plate. Twitter, the $20bn social media company he founded and runs, is accused of bias by US lawmakers. Square, the $28bn digital payments company he also started, has lost nearly a third of its market value following the exit of a key executive. Time for Mr Dorsey to scale back.
This week Square announced that Sarah Friar, chief finance officer and de facto boss when Mr Dorsey is not around, would be leaving to run Nextdoor, a social network. The move suggests Ms Friar’s ambition to be CEO trumps her other work interests. Mr Dorsey should hand her the reins of Square before she leaves in December.
The US has no particular governance code limiting executive positions but running two companies at once is surely distracting. The best-known multitasking CEO in the US is Elon Musk — hardly a model example.
Tech stocks have all been marked down this week but Square’s fall stands out. Even so, that requires context. The stock is up 550 per cent since its initial public offering in late 2015. Expansion into peer-to-peer payments and small-business lending have convinced the market that Square is more than just a payments processor.
But extending loans to customers is a relatively hazardous way to drive growth, so deep into the credit cycle. Square is valued at around 70 times expected ebitda, an earnings measure; its key rival PayPal trades at 19 times.
Short term, Square will not suffer. The business is carved into divisions such as Square Cash and Square Capital, meaning it can run without disruption while a replacement CFO is sought. Riskier business is boosting returns too. Net losses narrowed to $6m in the second quarter from $16m a year ago. Third-quarter results should show losses falling further.
The share price drop therefore does not reflect imminent danger. It is a different sort of message. Mr Dorsey likes to say that Twitter and Square facilitate communication. He should listen to what the market is trying to tell him.
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