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Comment by jypepin | Hacker News Reader

So, how does that work for current stock holders and employees? If you own Twitter stock, will it be automatically sold at 43b val? And twitter will get out of public markets?

For employees, are they pretty much seeing their comp getting divided by 2 because now they can't sell the stocks/rsus they vest every quarter?

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I've seen two options floated:

- replace RSUs with cash payments on same vesting schedule @ equivalent of final sale price

- keep RSUs despite being private (apparently SpaceX issues RSUs just fine & has regular liquidity events)

I thought as a private company Twitter (and SpaceX) would be limited to 999 shareholders. Is that not then case?

I'm no financier and I don't know anything about a 999 limit, but apparently SpaceX has been doing something to make it possible:

https://twitter.com/TechEmails/status/1518408959022968833

No, I can say from personal experience receiving RSUs from private companies that there was no arbitrary limit on how many people could receive them. I don't fully understand why that is the case, my suspicion is that employees receive share units, i.e. are not "shareholders" technically. The share units can be converted to cash at liquidity events or will convert to actual shares at an IPO event.

Why would this be the case? There are tons of tech companies (possibly even most?) that have more than 1000 employees at the time of IPO. As far as I know there are no limits on the number of shareholders for C-corps, private or not.

It's 2,000 shareholders, and you are allowed to go above the limit, it's just that if you do, then you have to make public financial statements and in general follow all the disclosure rules and reporting requirements of a public company. Since it can be expensive to follow these requirements, especially for a startup that's not setup to do those sort of disclosures, startups will carefully avoid going over the limit. But since Twitter has already been public up until now, all the processes and institutional know-how to comply with those requirements is already in place, so continuing to comply shouldn't be too hard.

It was also my impression that holders of employee stock are not counted in the same way as normal shareholders, hence the tendency to limit third-party transactions of RSU shares. But I might be mistaken.

What is "regular liquidity events"?

Every 6 mos, SpaceX goes to investors, determines a price, and allows employees and other investors to sell shares to these investors if they'd like to get some liquidity.

Lets them stay private longer term while still allowing employees to benefit from stock appreciation.

The company has a fiduciary duty to treat minority shareholders to the owning block and the major stock exchanges have rules protecting their interests.

This is one area of the the law that works well.

If the deal goes through, ever share of Twitter will be sold to Elon Musk for $54.20. It's like eminent domain, you don't get a choice, you just get cash instead of your property.

I don't know how it impacts RSUs. I'd imagine RSUs already committed to are bought out, and future contacts need to compensate people some other way.

I personally think Twitter's long-term prospects looked grim. I think realistically this is one of the better outcomes for Twitter's ability to remain viable well into the future. All the recent feature releases seemed like half effort attempts to keep the water from seeping in.

For stockholders I believe it would happen as a “corporate action” like a stock split but instead overnight the shares in your account would be exchanged for cash. Not exactly the same workflow as a sell.

I wonder how this works for options. I bought a couple of calls.

Presumably they'll be cash-settled, like most options are anyway.

The money is going to be a big problem for retention. They'll then be limited to right-wingers but maybe they wanted to outsource the software engineering anyway.

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