Jack Dorsey gives 1% Twitter stock to employee equity pool | Hacker News Reader

Jack Dorsey gives 1% Twitter stock to employee equity pool

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81 pointsrunesoerensen36 comments

This is a little weird. Jack Dorsey is not a majority owner of Twitter and so he can't do whatever the heck he wants. Most companies would ask the board for approval to issue more shares for its employees - this did not happen. So then the question is, 'why does Jack feel compelled to donate his shares more than any other Twitter shareholder?'

One reason could be Jack is a philanthropist and believes in giving back to people who may have contributed to his success.

Another could be Jack expects a return in investment. But how much? Twitter market cap is ~19B. He is giving 1% of Twitter to employees which is 190M. He owns 3% therefore he was worth 570M. To make his money back, Twitter must rise from 19B to 25B. Can 190M invested in its current developers achieve this?

Probably not. Jack is most likely trying to save Twitter. The third option is Twitter is in big trouble and only Jack can see it. This could be a last ditch effort to make short term investments to save the company by investing in the people that matter most. It's a bold move that could pan out in their favor.

i think it's more that he already has way more money than he needs. And needs to inspire confidence with employees and show his commitment to creating a better Twitter. to him it doesn't mean much financially, but he's probably hoping it shows that he's committed.

> effort to make short term investments to save the company by investing in the people that matter most

those seem like long-term investments to me

I think it's debatable. Is a one time bonus to employees long term or short term? Since it's equity and not cash it probably depends on the structure of the deal.

It's only one tactic in the company's overall strategy for long term viability. My hunch is the move is closer to an emergency maneuver to address immediate issues.

I had the same line of thought as you. I wonder how large his RSU grant will be as CEO. That would counteract some of this.

Doubt he's the only one who can see it. It's written up in many stories and most people using Twitter can see how much of a graveyard it can become at times. (It's the social network I use most, so I'd rather that weren't the case.)

This could be purely a move about PR and legacy. In recent times we've seen Yahoo and then Microsoft make expensive moves in an attempt to gain relevance.

I'm not sure it'd be the rank and file employees who hold Twitter back, but anyone steering it?

> .. how much of a graveyard it can become at times

Could you expand on this? I don't use Twitter enough to know the subtleties of it.

For me it feels like graveyard when I search for a hashtag that interest me and all I see are promotions and links to other pages. I want to see actual discussions among people like me so I can participate.

Note: I don't truly understand how to use Twitter...

>Note: I don't truly understand how to use Twitter...

Does anyone?

Can feel like it goes hours with barely anyone seeding it with content, outside a select few people. You can tweet something you feel is really interesting and get no feeling that anyone has seen or appreciated it (my two main accounts have about 800-2000 followers). There are some active topics, but a lot of friends have abandoned it for Instagram. I don't use Facebook so I don't see how active that is by comparison.

My wife works in social media specifically and would go days without a tweet now. I take that as one sign.

One thing that's worth adding - Twitter as a corporation might be in trouble, but Twitter as a product is not. If the corporation fails then the product would be bought by Facebook/Google/Apple/etc and carry on for a very long time yet.

Twitter might be hard (impossible?) to successfully monetize to the point where it's actually profitable, but as a platform it still has a huge amount of value that lots of people would like to own. Platforms with millions of users never fail quickly.

> Platforms with millions of users never fail quickly.

Yes they do. When a better product arrives that gains enough traction, users migrate very quickly. Myspace, Altavista, Aol etc.

ICQ is a better example of how quickly people abandon communications platforms.

Everyone used to use ICQ.

Well, people used MySpace a long time. It even got relaunched a few times. So it din't die quick.

Not really. Only AltaVista is dead.

MySpace: Still going at https://myspace.com/

Altavista: https://en.wikipedia.org/wiki/AltaVista - shut down in 2013, 10 years after it was sold to Yahoo!.

AOL: Very much still alive at http://www.aol.com, owns sites like Huffington Post.

And in response to mattmanser, ICQ: Still going at https://icq.com/

They may not be the behemoths of the tech industry any more but they are definitely not dead. And the only one that is dead took a decade before it was shut down.

Sites with millions of users never die quickly.

Your position of never is not correct.

Formspring failed extremely fast.

http://techcrunch.com/2013/03/15/formspring-the-pioneering-a...

It was one of the fastest growing services in Web history, and unraveled just as fast.

The existing service was completely shut down. The homepage is now some kind of funnel for another service.

And an example that wasn't market based: Megaupload. 180 million users, killed overnight.

I've actually never heard of formspring. I guess the differentiator between formspring and twitter is that twitter is more mainstream. It's popular with celebrities, kids, etc. Formspring seems like a very specific niche market.

Megaupload was killed due to piracy issues. A bit different.

We are working from a different definition of fail.

I don’t think your math is correct. If he gave away 1% to Twitter employees, then he has 2% left, or 380MM. In order for these stocks to be worth 570MM, their price has to increase by 50%, which means that their market cap increases from 19B to 29B.

Yessir you are correct. Thanks :)

One important datapoint is that Jack Dorsey did something very similar at Square in December 2013: http://fortune.com/2013/12/20/squares-dorsey-returns-10-of-h...

Judging by how strong the Square team is, and how much he's respected there, I imagine this move is now part of his playbook to build a great organisation. It's courageous.

From the link above:

> Jack Dorsey, the founder and CEO of Square, has voluntarily given 10% of his shares in the company back to Square. The highly unusual move will expand significantly the pool of shares available for employee compensation and acquisitions while minimizing dilution for shareholders.

> Dorsey owns approximately 30% of Square and is giving back about 3% of the company’s total equity. The shares Dorsey is returning are worth between $97.5 million and $150 million based on estimates of the company’s valuation.

NYT headline: "Jack Dorsey Gives One-Third of Twitter Stake to Employees"

Article body: "Although no employee is being given additional stock directly" ...

How is it being distributed then?

It likely went to the stock pool that's been marked as "for employees"

Or to the USA analog of an employee benefit trust.

To thrive more, Twitter needs to be made simpler and more irresistible. It doesn't need charity that amounts to a few drops in the ocean. I could be wrong on this but I seem to remember that in one quarter alone sometime back, Twitter created fresh stock in the amount of around $800 million to grant to employees. $190 million is but a fraction of that.

Do the employees who got canned get to share in this pool? It would have been a nice gesture, esp to the open source team.

Duplicate: https://news.ycombinator.com/item?id=10436803 I actually think this NY times link is better because it provides more info and context, FWIW

Edit: Actually the NY times link was posted after this, so I guess it's a dupe of this, not the other way around :)

This is simply a tax move. Dorsey is going to pay hundreds of millions in capital gains taxes when Square goes public later this year. He gets to take this as a loss which he can write off against those taxes. It's essentially free. Great PR stunt but doesn't cost him a dime.

Now if you could explain how $190 million in losses can save $190 million in taxes, that would be great. Hint: it doesn't work this way.

No, it doesn't. But $190 million in losses can be written off against $190 million in gains.

He doesn't get to take this as a loss though, he's giving it away. It would be a loss if he invested in Twitter and then sold at a lower price.

Twitter is buying the stock back from him at $0. You can't just donate stock to a company. That stock's nominal value is $200,000,000. So he takes a loss of $200,000,000 which he can write off against any gains he gets from Square's sale.

Option 1) $200MM loss today, $200MM gain tomorrow, $0 taxes in April. Net result: $0

Option 2) Keep your $200MM today, $200MM gain tomorrow, $70MM taxes in April. Net result: +$130MM

Why would anyone want Option 1?

How can you write off gifts? Twitter is not a 401c3. This isn't a donation.

You can give gifts to a corporation. Twitter is buying the stock back at $0.

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