Coverage: Dorsey gives employees $200 million in stock

Jack Dorsey has been busy. He received full control at Twitter, he helped launch Moments for Twitter, his other company Square filed for its IPO and now he is pledging to give $200 million in stock back to Twitter employees.

The announcement comes at a difficult time for the social media company, which cut 8 percent of its workforce last week.

Sarah Frier of Bloomberg had the day’s news:

Twitter Inc. Chief Executive Officer Jack Dorsey is giving a third of his Twitter stock to the company’s employees, he said in a tweet today.

The shares amount to 1 percent of the San Francisco-based company, worth about $200 million. The move is to “reinvest directly in our people,” he said Thursday. It will go into the employee equity pool.

“I’d rather have a smaller part of something big than a bigger part of something small,” Dorsey tweeted. “I’m confident we can make Twitter big!”

His decision to give away shares may increase employee morale after recent staff cuts and help Twitter expand the pool of stock used to compensate employees without dilution. In the two weeks since he officially took the top job, Dorsey has made some big moves. The CEO cut 8 percent of Twitter’s workforce, appointed a new executive chairman, introduced the new Moments product and held a developer conference.

Matthew Lynley of Tech Crunch described bow this isn’t the first time Dorsey has pledged to give away shares:

If a third of his shares corresponds to 1% of the company, he still owns 2% of it, which is a sizable chunk of Twitter. (It’s probably a little more than that — as of the last proxy filing, Dorsey owned 3.64% of the company.) At market close, Twitter was worth $19.7 billion — making his existing stake (we’ll assume something like 2% for the sake of simplicity) worth around $394 million.

And, of course, he owns 24.4% of Square, another company worth billions of dollars that just filed to go public.

But this isn’t the first time he’s done something like this: in Square’s S-1 filing, he said he had given around 20% of his equity back to Square and to the Start Small foundation, a new organization he founded to fund entrepreneurs with a special focus on underserved communities, over the past two years. Both somewhat unusual moves, and Dorsey’s contribution to the Start Small foundation dovetails with other philanthropic efforts of tech leaders like Marc Benioff.

This move isn’t just symbolic. Returning hundreds of millions of dollars in stock to employees is not something that’s often done lightly — and if the company proves to be undervalued, like Steve Ballmer implies, there’s a ton of upside that Dorsey is offering to his employees.

Twitter now has some momentum. It just wrapped up its developer conference (mishaps aside) where it unveiled a suite of new tools and products geared toward further expanding the service’s footprint. It also launched Moments, its new view centered around big stories on Twitter, earlier this year. And a move like this is likely to help fire up the company’s employees even further.

Yoree Koh of The Wall Street Journal described Dorsey’s busy couple of weeks:

Mr. Dorsey, who is also a co-founder and CEO of payments company Square Inc., disclosed in that company’s IPO filing earlier this month that he plans to donate 40 million shares, or 10% of the company, to a charity foundation he started that invests in artists, musicians and local businesses. He wrote in a letter in the filing that he had already given back some 15 million shares to both Square and that foundation.

Mr. Dorsey’s announcement comes weeks after he agreed to stay on as Twitter’s permanent CEO, taking on the daunting task of reviving the social media service’s user growth. He must do this while figuring out how to make the service easier to use, stem employee defections and manage Square through an IPO.

Earlier this week, Morgan Stanley downgraded Twitter to the equivalent of a sell rating, saying that it questions the company’s ability to reach revenue targets due to limited user growth and engagement and concerns over advertising demand. Analyst Brian Nowak also noted that Twitter’s new curation feature, Moments, may not be enough to capture enough new users.

Twitter reports third-quarter earnings on Oct. 27.