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Twitter Is Said to Buy Employee Stock With Half of $800 Million in Funding

29 points by gatsby 15y ago

justin_vanw 15y ago
Twitter is already the dominant force in whatever it is you would call what they do, and they can't fund their operations without huge influxes of cash at regular intervals. This makes me wonder why investors would let them spend investor money on something that doesn't at all help them stay afloat long enough to become profitable. Perhaps there is something in this that makes them more likely to be a success? Perhaps they are making employees agree to stay for some amount of time as a part of accepting an option buyout? Giving away 5% of the value of your company seems like an expensive way to avoid some SEC paperwork, so I'm at a loss on why they would do this, other than just to be really nice.
- eekfuh 15y ago
  I think it does align some of the founders and early employees with the investors. The founders get to pocket a few million dollars, stop worrying about their paychecks and from there, they can shoot for the stars, which is something the investors want.
  - edanm 15y ago
    I'm guessing the founders have already cashed out, at least partially.
- kinkora 15y ago
  In some ways, paying out to employees does "help them stay afloat". Think about it. They are obviously doing this to retain their employees. Imagine if you work for Twitter for years and have all of these stock options but can't do a single thing about it because you know Twitter will not IPO any time in the near future. I'm pretty sure at some point you'll be feeling some frustration. Obviously I am speculating and it doesn't necessarily mean that's the case but to me, it sounds like they are doing this so that they can "reward" their employees. If it was me working for Twitter and was given a chance to cash in some of my employee stock, I would be a very happy and grateful employee. If you look at it this way, then you can think they are doing this to retain some of their most loyal employees to continue working for them hence "keeping them afloat".
binh_nguyen 15y ago
If I were Twitter employee, I would have cashed out. I can see Twitter will follow the same pattern as Myspace.
- mofey 15y ago
  This guy makes an argument as to why: http://www.shoemoney.com/2011/07/13/twitter-will-be-as-worthless-as-myspace-shortly/ http://www.shoemoney.com/2011/07/13/twitter-will-be-as-worth...
eekfuh 15y ago
Anyone else not surprised?
- andresmh 15y ago
  could you explain? I'm a noob wrt the stock market.
  - amorphid 15y ago
    It sounds two things are happening. First, some if the money Twitter is raiding from new investors will go to buy stock held by current shareholders; effectively half the money Twitter raises is not going to be used by Twitter. Second, the other half is going to Twitter as normal.
racer01 15y ago
Not surprised at all
lpolovets 15y ago
I'm very much a layman with regard to SEC rules, but I believe there's a rule that says you have to go public if you have 500+ shareholders. So, if 100-200 employees are willing to sell all of their stock now, does that mean Twitter gets to avoid being hit by the SEC rule for another 6-12 months?
- jackowayed 15y ago
  As I recall, it's not that they force you to go public, it's that they force you to start reporting a lot of information publicly (revenue, etc.) similarly to how public companies have to.
  - idoh 15y ago
    So you get the downside of being public but not the upside.
- teej 15y ago
  I find it unlikely that a company would reduce shareholders via an employee buyback. Employees arent likely to, and may not be allowed to, sell all of their stock. Also, the employees will become shareholders again if they have unvested shares waiting in the wings. It's also very standard for a growing company to switch to Restricted Stock Units as an employee incentive, holders of which do not count towards the magic 500.
kondro 15y ago
It's always nice to be able to take something "off the table." If I had an investor that was willing to pay me, directly, for 10 - 20% of my shareholding in a private company whilst additionally adding extra cash, I would take the offer too. It's not like Twitter decided to use half the $800m to buy-back shares instead of investing in the company, they just decided to get some cash out instead of just taking $400m.

29 points by gatsby 15y ago

Twitter is already the dominant force in whatever it is you would call what they do, and they can't fund their operations without huge influxes of cash at regular intervals. This makes me wonder why investors would let them spend investor money on something that doesn't at all help them stay afloat long enough to become profitable. Perhaps there is something in this that makes them more likely to be a success? Perhaps they are making employees agree to stay for some amount of time as a part of accepting an option buyout? Giving away 5% of the value of your company seems like an expensive way to avoid some SEC paperwork, so I'm at a loss on why they would do this, other than just to be really nice.

eekfuh 15y ago
I think it does align some of the founders and early employees with the investors. The founders get to pocket a few million dollars, stop worrying about their paychecks and from there, they can shoot for the stars, which is something the investors want.
- edanm 15y ago
  I'm guessing the founders have already cashed out, at least partially.
kinkora 15y ago
In some ways, paying out to employees does "help them stay afloat". Think about it. They are obviously doing this to retain their employees. Imagine if you work for Twitter for years and have all of these stock options but can't do a single thing about it because you know Twitter will not IPO any time in the near future. I'm pretty sure at some point you'll be feeling some frustration. Obviously I am speculating and it doesn't necessarily mean that's the case but to me, it sounds like they are doing this so that they can "reward" their employees. If it was me working for Twitter and was given a chance to cash in some of my employee stock, I would be a very happy and grateful employee. If you look at it this way, then you can think they are doing this to retain some of their most loyal employees to continue working for them hence "keeping them afloat".

binh_nguyen 15y ago

If I were Twitter employee, I would have cashed out. I can see Twitter will follow the same pattern as Myspace.

mofey 15y ago
This guy makes an argument as to why: http://www.shoemoney.com/2011/07/13/twitter-will-be-as-worthless-as-myspace-shortly/ http://www.shoemoney.com/2011/07/13/twitter-will-be-as-worth...

eekfuh 15y ago

Anyone else not surprised?

andresmh 15y ago
could you explain? I'm a noob wrt the stock market.
- amorphid 15y ago
  It sounds two things are happening. First, some if the money Twitter is raiding from new investors will go to buy stock held by current shareholders; effectively half the money Twitter raises is not going to be used by Twitter. Second, the other half is going to Twitter as normal.

racer01 15y ago

Not surprised at all

lpolovets 15y ago

I'm very much a layman with regard to SEC rules, but I believe there's a rule that says you have to go public if you have 500+ shareholders. So, if 100-200 employees are willing to sell all of their stock now, does that mean Twitter gets to avoid being hit by the SEC rule for another 6-12 months?

jackowayed 15y ago
As I recall, it's not that they force you to go public, it's that they force you to start reporting a lot of information publicly (revenue, etc.) similarly to how public companies have to.
- idoh 15y ago
  So you get the downside of being public but not the upside.
teej 15y ago
I find it unlikely that a company would reduce shareholders via an employee buyback. Employees arent likely to, and may not be allowed to, sell all of their stock. Also, the employees will become shareholders again if they have unvested shares waiting in the wings. It's also very standard for a growing company to switch to Restricted Stock Units as an employee incentive, holders of which do not count towards the magic 500.

kondro 15y ago

It's always nice to be able to take something "off the table." If I had an investor that was willing to pay me, directly, for 10 - 20% of my shareholding in a private company whilst additionally adding extra cash, I would take the offer too. It's not like Twitter decided to use half the $800m to buy-back shares instead of investing in the company, they just decided to get some cash out instead of just taking $400m.