After Elon Musk closed his $44 billion purchase of Twitter last week, employees at the company braced for job cuts. Some told CNBC they were worried about losing their equity compensation if Musk sent them packing before their shares vested the first week of November.
Musk and Tesla have been sued repeatedly over employees’ claims that they were fired just before their shares vested, depriving them of compensation.
However, it appears that the current tranche of stock-based compensation for many Twitter employees, who were there before Musk took over, will get paid out after all.
According to employees at the company and internal communications viewed by CNBC, newly vesting shares are expected to be paid in the first half of November, starting as early as Nov. 4. Employees said they were reassured by managers that the company’s payroll department was working on processing their vested stock.
Tech companies are known for paying a high percentage of their compensation through stock awards, and Twitter has been notably reliant on equity payouts. In the first six months of 2022, Twitter recorded a stock-based compensation expense of $459.5 million, up from $289.1 million during the same period a year earlier. That’s close to 20% of Twitter’s revenue for the quarter.
Musk has indicated many times in recent months that Twitter is overstaffed and that one of his first moves would be to make dramatic reductions. He’s already gotten rid of top executives, starting with the CEO, CFO, policy chief and other high-ranking leaders and their direct reports. Musk reportedly fired them “for cause,” potentially to avoid paying millions of dollars in so-called golden parachutes.
It’s not clear whether other executives and employees who were fired or who resigned after Musk bought the company will be compensated for shares about to vest. Twitter didn’t immediately respond to a request for comment.
Musk was scheduled to hold an all-hands meeting with Twitter employees on Nov. 2. The meeting was canceled unexpectedly, employees told CNBC.
The New York Times reported that layoffs at Twitter could take place before Nov. 1, a date when many employees were scheduled to receive stock grants.
Musk responded, “this is false,” in a tweet on Friday, though he didn’t provide any evidence or further details.
Twitter employees had some reason to be concerned about their equity, given the company is now in private hands, and because Musk has a history of apparently trying to avoid payouts.
According to 2009 deposition transcripts from a high-profile Tesla lawsuit, Martin Eberhard v. Elon Musk et al, a former Tesla Chief Information Officer named Gene Glaudell said Musk and other Tesla executives at that time, “did not want to say in public that Tesla was making cuts for financial reasons.” Rather, they tried to attribute the cuts to “performance and management accountability.”
In a lawsuit after that, about 50 former Tesla employees claimed the company had terminated them without paying equity compensation that they’d been promised in job offer letters. The former Tesla employees won, but the electric vehicle maker was able to overturn the decision later on appeal.
Musk is the richest person on the planet, with most of his wealth derived from Tesla stock via the perforam and a historically large compensation package that the company has granted him through the years.
Some unhappy Tesla shareholders are slated to take Musk and the Tesla board to court this month over his 2018 CEO compensation package. They allege that it was reckless to give away so much of the company’s stock to Musk, and that the pay package failed to achieve its stated purpose of getting him to focus on Tesla’s business.
Kathaleen McCormick, the same judge who encouraged Musk and Twitter to settle their differences and complete the $44 billion transaction they agreed to in April, is deciding the case.