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It’s pretty disingenuous to say that Thiel’s investments just happened to be “in the top 0.0001%” like he’s some 90s wunderkind. He bought non-public shares for

It’s pretty disingenuous to say that Thiel’s investments just happened to be “in the top 0.0001%” like he’s some 90s wunderkind. He bought non-public shares for $0.001 per share - a price that no one except a PayPal founder would have access to - years before PayPal went public and then watched it balloon after IPO and onwards. This is not the same thing as the average American making wise investments and to paint it like that is missing the point entirely. I certainly don’t agree that Thiel is “stealing” or being sinister here, but I also don’t see any other comments in this thread purporting he is. It seems the general consensus is this is just another “hack” of the system (purchasing shares of your own company before IPO with a triple tax benefit account) out of reach to 99% of people - which is true.

imgabe 5y ago
Anyone can purchase shares of a company they found. You can file paperwork for a few hundred dollars and immediately own 100% of the shares of your own company. Making those shares worth billions of dollars is left as an exercise for the reader.
- prezjordan 5y ago
  Not with funds in a Roth IRA. Everything must be at "arm's length" (otherwise a lot of people would purchase homes using their Roth)
  - imgabe 5y ago
    You can purchase real estate with a self directed IRA, not sure if it can be a Roth IRA, and probably not your primary residence, but I don't know the exact rules.
    - nrmitchi 5y ago
      You can purchase property with a Roth. It cannot be your primary residence. You have to be entirely hands-off with it. You are not allowed to manage the property, do repairs, etc. You are still not allowed to decree that the value of a house that you own is $10 and sell it in to your Roth in order to shelter it from taxes and get around contribution limits.
hagy 5y ago
But the shares truly were worth basically nothing at founding. If he made the contribution for tax year 1998, then they hadn't even raised any money and therefore there was zero external valuation. Anyone can found a company with a $1 market cap and have full ownership from their one dollar investment. But it's meaningless unless they turn that into an actually valuable company with a market cap in the billions. Thiel just got exceptionally lucky, in addition to a bunch of hard and smart work. I think this is a concept a lot of us struggle with when imagining the extreme wealth of the most elite tech entrepreneurs. Bezos, Gate, Zuck, and the rest all started with worthless companies and had substantial ownership as founders. Their wealth came from turning those large stakes in worthless companies into slightly smaller stakes into companies worth hundreds of billions.
- sbierwagen 5y ago
  Note there's significant limits on stock held in a Roth. Last I looked at it, you can't own more than 10% of the company, and you can't be an operating officer: 26 U.S. Code § 4975(2): (H)an officer, director (or an individual having powers or responsibilities similar to those of officers or directors), a 10 percent or more shareholder, or a highly compensated employee (earning 10 percent or more of the yearly wages of an employer) of a person described in subparagraph (C), (D), (E), or (G) The propublica article says Thiel put shares of his own company in his IRA. If true, that's not something you can do anyone.
- jimmyswimmy 5y ago
  We'd need more numbers to figure this out, but the article discloses that within the same month "the company sold a slice of itself to investors for $500,000." That should clearly establish the value of the company at the time. If that slice grew by a factor of 295, that is, the 500k divided by the 1.7k he invested, then he fairly valued the amount of stock he purchased. If not, the information presented suggests to me that he committed tax fraud. I don't know where to find the documents on Paypal's valuation and early ownership transactions to be able to dig further into this. One would imagine Propublica would have done so if it were feasible, and reported on it.
- julianeon 5y ago

imgabe 5y ago

Anyone can purchase shares of a company they found. You can file paperwork for a few hundred dollars and immediately own 100% of the shares of your own company. Making those shares worth billions of dollars is left as an exercise for the reader.

prezjordan 5y ago
Not with funds in a Roth IRA. Everything must be at "arm's length" (otherwise a lot of people would purchase homes using their Roth)
- imgabe 5y ago
  You can purchase real estate with a self directed IRA, not sure if it can be a Roth IRA, and probably not your primary residence, but I don't know the exact rules.
  - nrmitchi 5y ago
    You can purchase property with a Roth. It cannot be your primary residence. You have to be entirely hands-off with it. You are not allowed to manage the property, do repairs, etc. You are still not allowed to decree that the value of a house that you own is $10 and sell it in to your Roth in order to shelter it from taxes and get around contribution limits.

hagy 5y ago

But the shares truly were worth basically nothing at founding. If he made the contribution for tax year 1998, then they hadn't even raised any money and therefore there was zero external valuation. Anyone can found a company with a $1 market cap and have full ownership from their one dollar investment. But it's meaningless unless they turn that into an actually valuable company with a market cap in the billions. Thiel just got exceptionally lucky, in addition to a bunch of hard and smart work. I think this is a concept a lot of us struggle with when imagining the extreme wealth of the most elite tech entrepreneurs. Bezos, Gate, Zuck, and the rest all started with worthless companies and had substantial ownership as founders. Their wealth came from turning those large stakes in worthless companies into slightly smaller stakes into companies worth hundreds of billions.

sbierwagen 5y ago
Note there's significant limits on stock held in a Roth. Last I looked at it, you can't own more than 10% of the company, and you can't be an operating officer: 26 U.S. Code § 4975(2): (H)an officer, director (or an individual having powers or responsibilities similar to those of officers or directors), a 10 percent or more shareholder, or a highly compensated employee (earning 10 percent or more of the yearly wages of an employer) of a person described in subparagraph (C), (D), (E), or (G) The propublica article says Thiel put shares of his own company in his IRA. If true, that's not something you can do anyone.
jimmyswimmy 5y ago
We'd need more numbers to figure this out, but the article discloses that within the same month "the company sold a slice of itself to investors for $500,000." That should clearly establish the value of the company at the time. If that slice grew by a factor of 295, that is, the 500k divided by the 1.7k he invested, then he fairly valued the amount of stock he purchased. If not, the information presented suggests to me that he committed tax fraud. I don't know where to find the documents on Paypal's valuation and early ownership transactions to be able to dig further into this. One would imagine Propublica would have done so if it were feasible, and reported on it.
julianeon 5y ago