Update 10/24 from Michelle: We’ve gone ahead and updated this post after getting some feedback from a corporate lawyer who is not involved with Twitter. This was prompted by Dan Primack’s piece yesterday that quoted “a source familiar with the situation” who said we read part of the disclosure wrong. We’ve also re-read the disclosure as well as Exhibit 10.2 which spells out the new plan and as a result have changed our headline on the piece to tweaks from our initial use of the word doubles. Our attempts to reach someone at Twitter have been unsuccessful so far. I’ve been reading filings for over 10 years now and pride myself on getting it right.
On a day when much of the tech world was focused on Apple’s big Ipad announcement, complete with live-blogging updates like this one from our friends at GigaOm, Twitter quietly filed its latest revised S-1. The 512-page document was filed just three minutes before the SEC’s electronic window closed for the night and included several new disclosures, only one of which — the tapping of a $1 billion credit line provided by Twitter’s lead underwriters — was picked up (see this WSJ piece and this one from Bloomberg for more details) by major news outlets.
But far more fascinating to us was a disclosure that we found on pg. 135 that had previously been left blank. The disclosure sets the value of initial stock grants for Twitter’s five outside board members at
a minimum of up to $16 million each, double what the company had initially planned, though that number too was new to yesterday’s amended filing. Unfortunately, the disclosure and the attached exhibit is still a bit vague, leaving lots of room for interpretation.
Now, unless you’ve spent the past few weeks under a rock, chances are that you’ve heard about the dust-up over Twitter’s seven-member all-male board, which has been covered here and here and here (among others). Given that, filing at 5:26:34 on the same day as a big announcement from Apple is downright brilliant. Here’s the actual disclosure:
Outside Directors. Our 2013 Plan provides that all outside directors will be eligible to receive all types of awards (except for incentive stock options) under our 2013 Plan. In connection with this offering, we intend to implement a formal policy pursuant to which our outside directors will be eligible to receive equity awards under our 2013 Plan. Our 2013 Plan provides that in any given year, an outside director will not receive (i) cash-settled awards having a grant-date fair value greater than $4 million, increased to $8 million in connection with his or her initial service; and (ii) stock-settled awards having a grant-date fair value greater than $4 million, increased to $8 million in connection with his or her initial service, in each case, as determined under GAAP.
In prior versions of the filing, the numbers were left blank. Beyond the timing, the disclosure itself is masterfully written. Despite being just over 100 words, I had to read it several times, in part due to the use of the word “not” in front of the word receive. The complete plan is attached as Exhibit 10.2 to yesterday’s filing.
Just to put this into perspective, we went back and skimmed the pre-IPO filings for both Google and Facebook to see what those directors got: two of Facebook’s directors received around $600K worth of stock each, which isn’t even close. But Google gave each of its directors 65,000 shares each, which, depending on the assumptions made and what has already been exercised is in the same ballpark.
There were other interesting disclosures in the filing too — far more interesting, to us at least, than the $1 billion credit line, which as the various articles pointed out, is pretty common these days for tech companies in the pre-IPO stage.
Attached to the end of the filing were letter agreements with six of Twitter’s top executives, only three of whom had previously been identified as “named executives” in the company’s filings. Those exhibits, each dated Oct. 1, provide some additional details on compensation, including this agreement with COO Ali Rowghani, this one with CFO Mike Gupta and this one with General Counsel Vijaya Gadde. With the exception of CEO Dick Costolo, the five other executives are each being paid a base salary of $250K a year, which is $50K more than had been previously disclosed for the two executives Twitter had provided this information on, Global Revenue Head Adam Bain and Senior VP for Engineering Christopher Fry. Of course, if the outside directors are getting $16 million each, the real bounty comes from the stock grants to the executives, something Tuesday’s filing provides no additional information on.
As a result, the agreements are amazingly minimalist since there’s no details about options, restricted stock, performance-based shares or even any detailed language on severance — the types of things that typically create bloat in most executive agreements.
There were several other significant number-related disclosures in Tuesday’s filing: Twitter plans to make 12 million shares available to its employees under its Employee Stock Purchase Plan and it expects the total offering to consist of 5 billion common shares and another 200 million preferred shares.
We often talk about the Friday Night Dump here at footnoted. While Twitter’s Tuesday night filing doesn’t quite fall into the category of a true dump, it certainly seems as if they timed the filing to coincide with Apple’s big release.