GrizzlyRock: Long Thesis For This European Travel Company [Q1 Letter]
GrizzlyRock Value Partners was up 16.6% for the first quarter, compared to the S&P 500's 5.77% gain and the Russell 2000's 12.44% return. GrizzlyRock's long return was 22.3% gross, while its short return was -2.9% gross. Compared to the Russell 2000, the fund's long portfolio delivered alpha of 10.8%, while its short portfolio delivered alpha Read More
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In what was one of the biggest launches this year for a technology company, social media giant Twitter had its IPO last week. The deal raised approximately $2.1 billion for Twitter, minting the biggest wave of Bay Area millionaires since 2012, when Facebook went public.
Becoming a millionaire overnight comes with serious responsibilities, including learning what to do with that amount of money. Those whose bank accounts swelled as a result of Twitter’s initial public stock offering (IPO) should heed the lessons learned by Google’s millionaires.
One certain beneficiary of Twitter’s IPO is Chief Executive Dick Costolo, who stands to make more than $10 million on his initial investment. Back in June 2007, however, the success of Twitter was anything but certain. Looking for investors, co-founder Evan Williams dashed off a note to his old friend Costolo asking him to invest either $25,000 or $100,000 in the start-up. “I’m on the $25k bus,” Costolo replied less than three minutes after receiving the email. “Thanks, this will be a lot of fun.”
In those days, most people laughed at the idea of Twitter. Users were often referred to as “twits” and people questioned – rightfully – whether we really needed to know who is “just making a protein smoothie,” even if it was in 140 characters or less.
The bus ride for Costolo turned out to be not only fun, but also highly profitable. His total stake, including shares he’s received as an executive, is likely worth more than $300 million.
Costolo isn’t alone, of course. Co-founder Williams stands to rake in over $1.5 billion. A handful of other early investors and top-level execs stand to make millions, if not billions. And more than 700 Twitter shareholders are referenced in the company’s most recent Securities and Exchange Commission listing, many of whom are presumably rank-and-file employees. At the IPO opening price of $26, these shares have a combined value north of $2 billion.
Many of these employees became overnight millionaires when the company went public last week. While most will be restricted from cashing in their stock until six months after the shares begin trading, it’s almost certain they have hatched plans on how to spend their anticipated windfall. Before Facebook went public in 2012, one former employee had already booked a trip to space – at a cost of $200,000. That’s pocket money, of course, when your shares are worth $50 million.
Not surprisingly, Wall Street types are circling, hoping to educate these soon-to-be millionaires. “I’m sure every broker or financial adviser is out there talking to employees,” Kathleen Smith of IPO fund manager Renaissance Capital told NBC News.
To prepare for the onslaught of Wall Street brokers, Twitter’s nouveau riche would be smart to take a lesson from the playbook of the company’s Silicon Valley neighbor, Google.