Back in 2011 — when Twitter was raising $US800 million in investor funding and using some of that to buy back stock options it had previously granted to employees, as a reward for hanging in there — the company filed this disclosure with the SEC, telling the feds how its stock incentive plan works.
Naturally, with Twitter’s S-1 IPO filing expected any day now, that plan has suddenly become interesting again. It tells us how Twitter rewards longtime employees with its own stock. Employees who have been at Twitter the longest now stand to become suddenly very rich, when their stock vests with the public sale.
Of course, this is a two-year-old document. Twitter’s plan may have changed drastically between then and now. But even in 2011, Twitter was a fast-maturing business. It raised the $US800 million in part because it wanted to reward employees without having to wait for an IPO. Twitter has raised about $US1 .2 billion from investors in total. Some at the company were already thinking about the timing of the IPO even back then. This document, way back in 2011, actually talks explicitly about the prospect of an IPO.
It’s important to note that this document only covers restricted stock units and not stock options or regular stock awards — meaning that it does not describe all the ways in which Twitter can reward staff with stock. Nonetheless, here are some of the highlights:
- Twitter’s stock was classified in eight different tranches or “series.”
- By August 2011, 83 employees at Twitter had earned restricted stock units (RSUs). Those RSUs turn immediately into Twitter common stock when the IPO happens. They are better than stock options, the disclosure says, because they do not require the employee to buy a share at a cheap, fixed price and hope that they can sell it at the higher regular IPO stock price, which is often the way options work. (Twitter now has roughly 1,300 employees, according to the LinkedIn count on Crunchbase.)
- The swap of RSUs for common stock will happen on the day of a “liquidity event.” Like an IPO.
- This table, showing Twitter’s RSU vesting schedule, shows that employees who have been with the company two years or more are going to get the most stock:
- Employees who have left the company will retain their RSUs:
- Twitter employees have not been allowed to sell their RSUs on a “trading market” since receiving them, the letter to the SEC says.
The SEC approved the plan, and that approval was the last public financial disclosure Twitter has made.
Twitter is reportedly considering offering its IPO stock at about $US29 a share.
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