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It turns out Jack Dorsey doesn’t need Twitter’s help to enter the billionaire’s club.Business Insider reported last year that Dorsey owned 28.3 per cent of Square, the payments startup he cofounded, according to a 2011 filing it had made with the state of Alaska.
After Square raised $200 million at a $3.25 billion valuation, we pegged Dorsey’s stake at worth $845 million. His stake in Twitter, a company he also helped found, took him over the $1 billion mark.
But an updated filing in Alaska reports Dorsey as now owning 32 per cent of the company.
That means his stake in Square is actually worth $1.04 billion.
How did Dorsey’s stake increase to 32 per cent, even as Square raised hundreds of millions of dollars in venture capital—which should in theory lower his percentage stake?
There are any number of ways Dorsey could have done it.
But there’s one very obvious method, with ample precedent.
In 2005, Facebook’s IPO filings revealed, Mark Zuckerberg received an option to buy 120 million shares, in connection with his services as CEO. That option, long since vested, served to protect him against the dilutive effect of Facebook’s subsequent fundraising.
So let’s assume Dorsey was granted options—probably not long after its founding in 2009. Most of those shares would have vested by now.
It would also make sense, from a tax-planning perspective, for Dorsey to exercise his vested shares before its most recent financing round raised its valuation, since that would lower the tax bill he’d face.
A Square spokesperson declined to comment on Dorsey’s increase in ownership between the two filings.