4 ms·

He invested the entire amount ($1700 at the time, iirc) into his new startup before they'd raised any money: Paypal. Then used the proceeds from that to invest

He invested the entire amount ($1700 at the time, iirc) into his new startup before they'd raised any money: Paypal. Then used the proceeds from that to invest in variety of things, including an early (angel?) investment in Facebook. It's all detailed in the Propublica story where they described his Paypal investment as a "sweetheart deal".

dehrmann 5y ago
There's a huge survivorship bias with this. He put his IRA on 00 and it hit, but most of the time, it won't, and most people wouldn't take that bet. This is a lot of effort to solve a non-problem that got press coverage.
- mikeyouse 5y ago
  It seems strange to describe it as a "non problem" when he's successfully evaded something like a billion dollars in taxes. Romney did the same. Certainly many others have as well. Thiel bought his shares at $0.001/share in the same round where the company was valued at $0.20/share. At very least, he should've been capped at 10,000 shares in the IRA but instead he contributed 1.7 million ($2k/year IRA contribution limit at the time). It's like describing a software bug as a non problem since it only lead to two intrusions.. that you know of.. that cost your company a ton of money.
  - drocer88 5y ago
    Romney's was in a regular IRA. He delayed taxes. Withdrawals are taxable as regular income. If he was really smart, he would have done it outside his IRA and paid the taxes on the lower capital gains rate.
  - caseysoftware 5y ago
    > Thiel bought his shares at $0.001/share in the same round where the company was valued at $0.20/share. The strike price and the "fair market value" are often different so there's nothing exceptional or even unique there. Odds are, half the people reading this thread have had the same situation in their careers. The difference is that this company (Paypal) ended up working so those shares became valuable. If you or I did it, we'd pay the strike price, it'd be reported to the IRS at the FMV, and we'd pay the tax on the difference. In this case, it would be some percent (22? 25?) of 1.7M*(0.20-0.001) or ~$338k. Of course, from there you get into the "unrealized gains" battle that screws over people with illiquid shares.

dehrmann 5y ago

There's a huge survivorship bias with this. He put his IRA on 00 and it hit, but most of the time, it won't, and most people wouldn't take that bet. This is a lot of effort to solve a non-problem that got press coverage.

mikeyouse 5y ago
It seems strange to describe it as a "non problem" when he's successfully evaded something like a billion dollars in taxes. Romney did the same. Certainly many others have as well. Thiel bought his shares at $0.001/share in the same round where the company was valued at $0.20/share. At very least, he should've been capped at 10,000 shares in the IRA but instead he contributed 1.7 million ($2k/year IRA contribution limit at the time). It's like describing a software bug as a non problem since it only lead to two intrusions.. that you know of.. that cost your company a ton of money.
- drocer88 5y ago
  Romney's was in a regular IRA. He delayed taxes. Withdrawals are taxable as regular income. If he was really smart, he would have done it outside his IRA and paid the taxes on the lower capital gains rate.
- caseysoftware 5y ago
  > Thiel bought his shares at $0.001/share in the same round where the company was valued at $0.20/share. The strike price and the "fair market value" are often different so there's nothing exceptional or even unique there. Odds are, half the people reading this thread have had the same situation in their careers. The difference is that this company (Paypal) ended up working so those shares became valuable. If you or I did it, we'd pay the strike price, it'd be reported to the IRS at the FMV, and we'd pay the tax on the difference. In this case, it would be some percent (22? 25?) of 1.7M*(0.20-0.001) or ~$338k. Of course, from there you get into the "unrealized gains" battle that screws over people with illiquid shares.