Musk offers equity grants to Twitter employees at $20bn valuation
Twitter CEO Elon Musk is reportedly offering employees stock grants at a valuation of roughly $20 billion. This is less than half the $44 billion that Musk spent on acquiring the firm last year. To note, the stock-based grants will start to vest after a duration of six months. The number and identity of the employees who received the equity grants are not known.
Why does this story matter?
- Stock-based compensation is quite popular in several IT companies.
- However, in the case of Twitter, the lower valuation at which stock grants are being done is certainly a cause for worry.
- Post Musk's acquisition, the firm has steadily declined in value, leading employees to question whether they will be fairly compensated. The company should issue a clarification at the earliest.
A detailed look at the equity grants
Musk informed employees of the new equity grants in February. According to him, the stock compensation will vest over a four-year period. This will be in addition to and separate from legacy Twitter equity converted into cash at the time of acquisition last year. At the time of acquisition, employees' existing equity grants were converted into the right to receive cash for $54.20/share.
Musk linked stock grants to employee performance
Describing the parameter behind offering stock compensation to Twitter employees, Musk said that "very significant stock and other compensation awards" would be granted "based on performance." He also added that "exceptional amounts of stock will be awarded for exceptional performance." This seems quite similar to the compensation method employed at SpaceX, where the firm's stocks are used to attract/pay the workers.
How does stock-based compensation work at SpaceX?
SpaceX is a private company that invites former/current workers to liquidity events from time to time. Here, they can sell their company stocks. However, the firm sets a total value of shares that can be cashed out. Moreover, there is no guarantee that everybody will be able to cash out their equity holdings and sell all of the stocks they please.
Twitter spent $630 million on stock grants in 2021
Before going private, Twitter spent $630 million on share-based compensation to employees in 2021. At that time, the firm had over 7,500 full-time employees. This number has now fallen to around 2,000. There is naturally anxiety among workers over how they will be compensated.
