Kara Swisher

Recent Posts by Kara Swisher

Take the Money and Run? Twitter Shareholders Now Mulling Cash-Out Offer From DST.

Whether or not to sell any of their shares in Twitter is the big decision facing stakeholders of the microblogging service right now, as the second $400 million part of the company’s recent funding by Russia’s DST Global is completed in the next several weeks.

That includes everyone from early angel investors to those who bought it on the secondary markets to Twitter’s 600 employees, all of whom can sell a portion — up to 20 percent, sources said — of their holdings.

It’s all part of a recent $800 million mega-funding by Twitter, valuing the San Francisco company at $8.4 billion.

While $400 million went to Twitter, the second tranche of $400 million of the total was targeted to cash out current investors and also employees of the company.

Current investors include Benchmark Capital, Union Square Ventures, Spark Capital and several other venture firms, as well as a spate of prominent angel investors, such as Ron Conway.

Whether DST — as well as other smaller buyers, including early Twitter investor Chris Sacca and T. Rowe Price, according to the tender offer — gets them and others to sell enough shares is the big question, especially since few want to get caught in what one shareholder called the “Facebook idiot box.”

That would be referring to those who sold their investments in Facebook two years ago, when the social networking giant allowed its employees to sell 20 percent of their stakes to DST.

The financing was part of a $100 million add-on to a $200 million investment in the social networking company by the aggressive Russian investor.

At the time, the tender offer valued Facebook at $6.5 billion for the common stock, or $14.77 a share.

Of course, Facebook is worth upward of more than 10 times that now. Oops!

That’s why high-profile Silicon Valley venture firm Andreessen Horowitz, for example, is not selling out any of the shares it bought earlier this year in an $80 million transaction in private secondary markets.

Reasons to sell, of course, are also compelling.

Some investors might want to lock in upside, especially if they think the latest valuation is too high.

For venture capitalists in the company, some might want to return a win to their limited partners, while Twitter employees might want to put a down payment on a house after years of toiling in the start-up.

Others might also be worried about Twitter’s prospects going forward and might determine that the recent round was the high point of its market value. Twitter has indeed struggled to find a sustainable and lucrative business model, focused on advertising.

In addition, although it has recently stabilized, others might worry about Twitter’s management changes over the last year, as co-founders Biz Stone and Evan Williams have departed. Twitter creator and other co-founder Jack Dorsey is now running the company’s product efforts, with CEO Dick Costolo (who looks a lot like that Woody Allen shot above from the classic movie, “Take the Money and Run”).

Then again, that was exactly the take on Facebook several years ago, so it is now a case on all sides of seller beware.

Twitter declined to comment and I have not heard back yet from DST about the status of the transaction.


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