Twitter (TWTR) IPO hype may not be so exciting for shareholding employees who will pay big in taxes. For the company’s 2,300 shareholding employees, it will mean as much as $420,000 in taxes per employee next year.
As previously reported on The Inquisitr,Twitter CEO Dick Costello was talking about this IPO back in January. As the popular social media tool has now hit Wall Street, everyone is talking about how high it will end up trading by the end of the day. The stock started the day trading at $26 a share. The $26 IPO price values Twitter at $14.2 billion. The company intends to raise $1.8 billion by selling 70 million shares in the public offering.
Depending on how trading goes for the stock, non-executive employees may end up paying for about $966 million in taxes. That’s an average of $420,000 from each of the firm’s roughly 2,300 employees. So, although they will be making some money from their stocks, they will also see a giant increase in taxes next year. Don’t expect to see anyone selling those shares just yet.
In its S-1 Twitter has stated that it is considering spending about $113.8 million to cover employee tax obligations while withholding some shares (that price estimate was based on a share price range of $23 to $25, since raised to $26). In doing so, Twitter is basically holding some of their pay to employees to cover the tax hit that many will take.
Twitter makes money from selling ad space and promoting major companies through their promotion tool. The reality is that Twitter hasn’t actually ever been a profitable company. In the first 9 months of 2013, Twitter’s revenue came in at $422 million. But losses also increased, to $134 million. So Twitter’s IPO has many people wondering, why would I buy?
The answer is that, just like with Facebook, Twitter has great financial potential. The concern is whether realizing that potential will ruin the Twitter experience for users, turning it into an overrun ad space. But for now, Twitter employees are watching the stock market to see just how much they will pay in taxes.