

Twitter Is Said to Buy Employee Stock With Half of $800 Million in Funding - gatsby
http://www.bloomberg.com/news/2011-07-22/twitter-is-said-to-buy-employee-stock-with-half-of-800-million-in-funding.html

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justin_vanw
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.

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eekfuh
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.

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edanm
I'm guessing the founders have already cashed out, at least partially.

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lpolovets
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?

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jackowayed
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.

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idoh
So you get the downside of being public but not the upside.

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

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mofey
This guy makes an argument as to why:

[http://www.shoemoney.com/2011/07/13/twitter-will-be-as-
worth...](http://www.shoemoney.com/2011/07/13/twitter-will-be-as-worthless-as-
myspace-shortly/)

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kondro
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.

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eekfuh
Anyone else not surprised?

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andresmh
could you explain? I'm a noob wrt the stock market.

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amorphid
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.

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racer01
Not surprised at all

