Mercer Capital's Financial Reporting Blog

Inside the Twitter IPO: Payday for Directors and an Estate Planning Opportunity

Excitement about the upcoming debut of Twitter as a public company is palpable as related stories and rumors make the rounds in the financial press. Is the company going to raise $1.0 billion or $1.5 billion? What about valuation – $11 billion or $15 billion; $20 a share or $28 a share? Who are the winners, who are the losers?

Being firmly seated in the peanut gallery, we would be remiss not to highlight two stories that illustrate how seasoned business executives and young entrepreneurs alike will likely come out winners.

  • At Fortune, senior editor Dan Primack reports that outside directors at the company do not receive cash remuneration. However, they stand to receive sizable payouts in a combination of cash and stock-settled equity-based compensation following the IPO. While information on the award instruments – stocks, options, restricted shares, or other derivative units – is scarce, each director could receive up to $16 million (grant-date fair value) annually.
  • This Wall Street Journal article pulls back the curtain on some estate planning strategies employed by Twitter executives around the IPO. While the structures vary – some individuals have elected to use Grantor Retained Annuity Trusts (GRATs), while others appear to have opted for asset-holding limited liability companies – the article estimates total potential tax savings could exceed $100 million.

For both start-up and mature companies, Mercer Capital’s valuation experts assist in the measurement of grant-date fair value of equity-based compensation across a variety of industries. Mercer Capital has been providing objective valuations for tax compliance since 1982.

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Mercer Capital monitors the latest financial reporting news relevant to CFOs and financial managers. The Financial Reporting Blog is updated weekly.