In October 2022, Elon Musk acquired Twitter for $44 billion, and since then, the microblogging site has been the focus of many speculations about its future. Recently, the Wall Street Journal reported that Mr Musk has decided to provide equity awards to Twitter employees at a valuation of close to $20 billion, less than half of the amount paid for the acquisition.
In an email to Twitter employees, Mr Musk expressed optimism about the company's future and stated that he sees a "clear, but difficult, path to a >$250B valuation." This statement implies that the shares awarded now would be worth ten times more, and he is confident that the company can achieve this valuation with significant changes. He said that Twitter needs to be thought of as an "inverse startup," and significant changes were required to prevent the company from going bankrupt.
The company also informed its staff that it is providing additional equity grants that will vest after six months. Additionally, the company intends to offer a liquidity event in about a year during which employees will be able to cash out some of their equity. The new grants are separate from and in addition to any legacy Twitter equity that was converted to cash at the time of the acquisition in October 2022 and will vest over a four-year period.
Twitter has been providing stock grants as part of employee pay that vested over time. However, no information is available regarding the number of employees who will get equity awards. Twitter had spent roughly $630 million on stock-based compensation in 2021, the last full year it publicly declared financial results before going private, according to regulatory filings.
The decision to provide equity awards to employees at a valuation of close to $20 billion could be seen as a strategic move by Mr Musk to motivate and retain employees. It is common for tech companies to use equity awards as a way to attract and retain talent, and Twitter is no exception. The grants could also incentivize employees to work harder and contribute to the company's growth and success.