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Twitter's Paper Millionaires May Want to Get Out ASAP (wired.com)
51 points by _pius 1376 days ago | hide | past | web | 32 comments | favorite

The Writer of this article needs to perform some fact checking. There are nowhere near 1600 Millionaires in Twitter - closer to 600 to 700 is the number most common heard in their offices.

A lot of those are not at the end of their vesting periods either so "Getting Out" is a meaningless term, not feasible for the next 2-3 quarters.

The quality of Wired articles is really plumbing the depths these days.

TWTR's fluctuation so far has been $38.80 - $74.73.

Wouldn't you expect the fluctuation in millionaire numbers to follow that, and count of millionaires to be on the high side during the stock's ups?

At peak $74.73 price it only takes 13,382 shares to go over $1 mil, which for company with 555,200,000 shares outstanding is 0.002% grant, generous, but not an unheard-of amount.

By the same logic, Google's stock is at $1100 meaning anyone with 900 shares of Google is also a millionaire. Now I don't know about you, but I have some software engineer friends at Google and, first hand information from them, they are NOT millionaires. Typically, companies know how much they are worth (or will be worth post IPO) and distribute stock to employees accordingly. Exception is of course if you join the company in the early rounds of funding (when typically the valuation of the company is low so you have to compensate with more stocks).

Twitter almost doubled its headcount in the last year itself - I am not sure if they were paying 10s of thousands shares to newly joined employees especially when their last valuation (before IPO) valued Twitter at $10B or so.

Some people have been offered that, and others have not.


Most likely that # is extrapolated from share-employee allocations listed in SEC filings x maximum stock price. You're kind of missing the point of the article by getting finicky over trivial details, the point being the highly questionable valuation of the firm.

Well, the heading of the article itself points to paper millionaires and the first line of the article refers to the 1600 millionaires number..

Indeed, such a lousy article. The stock is still net up almost 50% in THREE MONTHS and yet somehow he is writing some doomsday scenario article about it.

It reminds me of the crappy articles talking about how TSLA was down and doing terrible, when the price was around 25, months after it IPO'd at 17.

I wish I could downvote this article.

Employees also likely have a 6-month lockout, so even if they're vested, they still can't sell yet.

I think twitter is one of the most promising "social media" (are we still calling it that?) stocks out there. Where Facebook's main audience (teenagers) is jumping ship, I think Twitter has too many of celebrities and famous people "locked-in" to their platform for a comparable exodus to take place.

Added to that, media like Television have been integrating Twitter into their systems ( live tweeting, tweet voting etc. ).

Looks promising enough to me.

Twitter, just like Facebook, is grossly overpriced/overvalued. The number of users for both are impressive to say the least, but neither is making a profit that can justify the value of the companies. Both companies seem to have a business plan straight out of the dotcom era, that is: "let's slap some ads on and see if that works".

At this point I think we have seem what will be the downfall of Facebook, teenagers not thinking it's cool. As for Twitter, it might be a US vs. Europe thing, but I honestly don't know more that a handful of people using Twitter and all of them still have Facebook as well. Twitter is a broadcast platform nothing more. That works great if you want to follow celebrities, but if the celebrities are the reason for using Twitter for many, then Twitter is going to be much more vulnerable to an exodus that Facebook. Facebook users won't move to a new platform before all their friends have moved as well. With Twitter you just need to move the top celebrities and their followers will leave as quickly as they signed up.

In my mind Twitter has an impressive broadcast platform, but they aren't making the money to justify the value of the company and have no clear way to do so in the future. Someone is going to have to foot the bill at some point. No one is going to pay a subscription fee for neither Twitter, nor Facebook. That leaves ads or having companies and celebrities paying for their posts.

Twitter has a funny way of working like an little bubble. People on Twitter believe that everything revolves around Twitter, while the rest of the world are at most vaguely aware that it exists.

I considered this when I typed my little comment.

I would like to respond to your insightful comment about celeberties moving over to another platform.

I think this is just not going to happen very soon. I would like to compare a twitter account a lot more to a e-mail address. Celeberties and brands ( lets not forgot about brands ) have worked very hard (or waited rather long, at least) to get their millions of followers and their @username signature.

I think this is what causes a kind of lock-in: moving away would mean that your messages would get a lot less attention and having to wait a long time to be back at a million followers AND abandoning your @username, which many people have come to know you by.

Now I don't know anybody by their Facebook profile URL, while I know many celebrity @usernames, even though I don't use Twitter. Finding somebody on Facebook is the same as finding anybody on any profile site. You have to use the search, there is no added value. Twitter has a very strong weapon here with their @username offering.

Also, I don't think a new platform could offer enough extra's for them to take the step. Another platform would have to offer something so special that it justifies leaving a million followers behind. I don't see this happening because the strength of Twitter is its LACK of features. You type something and move on. You see how that cancels out any newcomer?

I'm from Europe, and I see a lot of people using Twitter. If I look at my Facebook stream, a lot of the status-updates are coming in through Twitter, or at least apps that post to multiple networks.

Also, I think that I should add that both you and me are commenting from own experience, neither of us is saying anything based on market research. So let's not keep doing this :)

I think you're right about the not abandoning @usernames, but new celebrities are showing up very year and they are not yet tied to any platform.

And yes, let's not keep doing this :-) Market research would be exciting to see though.

I think if you just look at the shear number of followers mainstream (i.e. CNN) and alt (Vice) news accounts have or the same for financial news accounts, it becomes pretty obvious that a huge number of Twitter users rely on it for REALLY important information. I don't look at customized Feedly or Flipboard type aggregators anymore, and why would I? The information I get from who I follow on Twitter is available sooner, is summarized and usually has the option to dive deeper. While we can see that celebrities have huge follower counts, because their accounts are often water down by third parties, it seems logical that people follow them as a way to just say they 'like' them and not as a source of important information.

Am I the only one that can't read Wired articles on an iOS device (g4 iPod) anymore? Why the heck is this page constantly rerendering?

You would want to do this at any company. If it tanks, you lose both your job and your nest egg. Diversification is the name of the game.

The issue of getting out is a pointless term for most of the employees right now. They won't be fully vested for at least 6mos to a year.

The lesson of the first dotcom bubble is that making money is easy, holding onto it is hard. I actually know a few ex-billionaires... That never saw actual dollars. Now they are working schmucks like anyone else.

Yep; diversify if you have that luxury!

What is the value of code that can cause revolutions, sway financial markets, and spread P2P information across the world instantly? How can any analyst know when there's no comp? Answer: they can't. I'd sell the hell out of $TWTR right now because the analysts are going to fill the news cycle with negetivity and the smart money is slobbering over short potential. Once it finds a bottom however, I'd double down on it and get ready to wake up daily to a green ticker.

Why can't they just write some long term options and safe guard their value. Or may be they are already doing it and wired may just have ignored it.

Are you talking about the employees? Surely they're still in the lock in period which prohibits any sort of trading including options.

You realize you would need a counter party for those, right? I'm not in finance, but maybe somebody who is can guesstimate the size of the long term options market for tech companies? I'd say it must be minuscule, how can you build a profitable strategy off something with that volatility without devolving into straight gambling?

I'd like to thank Wired for the buy signal on Twitter. :)

Isn't that the only way for dotcom wealth preservation?

what exactly is a "paper millionaire?"

First hit on Google. "An individual who has achieved a high net worth as a result of the large total market value of the assets he or she owns. This phenomenon usually occurs when investors buy marketable securities that are later bid up to much higher prices on the open market. While this creates large amounts of "paper profit", the paper millionaire's riches usually aren't safe until these holdings are liquidated."

Even better examples than the employees at Twitter are startup founders. They start a company and quickly raise 500k at a 2M pre money valuation. Suddenly, they own $1M of a $2.5M company. A millionaire, at least on paper. Not much changes in their lifestyle though. They still can't make a down payment on a house and generally don't drive nice cars. And that's the point of the title "paper millionaire". It doesn't mean much if you can't do anything with it.

The term "paper millionaire" means exactly as it sounds - someone who is a millionaire, but strictly on paper.

Most of the shares these Twitter employees have received cannot be sold until a certain amount of time. So the money is "on paper". They don't millions of dollars in their bank accounts - rather, they simply owns shares that are worth a million dollars.

Someone whose stock property ("paper") can be valued as > $1M, i.e. If they sell their TWTR stocks now they will be 'actual' cash millionaires.

I think liquidity is a key distinction. Many of those Twitter employees are in a lockdown(?) period post IPO where they are not allowed to sell their shares (typically 6 months). Thus they don't have the option of becoming cash millionaires right now. (Many startup founders are this way post series A)

Compare this to a case where someone owns $1MM worth of Google shares, purchased on the open market. Even though they don't have cash, it's basically as if they own cash, since you can liquidate the shares right away.

something something 'bitcoins' something something

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