This is helpful context as well, in addition to doomlaser's explanation of his background re: IBM and Red Hat. Thanks for sharing it.

I wonder to what extent Silver Lake drove this overall decision (vs. others on the board potentially initiating it)

Ah, Silver Lake, of Skype acquisition and zeroing-out employee equity fame.

https://www.wired.com/2011/06/skype-silver-lake-evil/

I didn’t realize they screwed over some of the execs by zeroing out options.

The night before the same transaction, they issued a pile of diluting shares to themselves, effectively clawing back something like 50% of the rank and file employees’ stock options.

I might have the date and percentage wrong, but it doesn’t really matter.

Silver Lake are total bastards and probably belong in jail. Avoid.

I thought stocks represented ownership of a company. If a company has 100 stocks and I own 50, I own 50% of the company. If the company issues 100 more, shouldn't 50% go to me, since a share represents a part of the company ownership and I own a known percentage of the company?

How is it legal to say "you bought 50% of this, but now I've arbitrary decided that I own 99% of it because I gave myself more percent"

Nothing on paper says "You own 50% of the company".

The company starts up, it has 100 shares, you get 50. If you calculate it, you own 50%.

Later on the company needs to raise cash, so it issues another 100 shares. Company now has a ton of cash in the bank. Total shares outstanding is 200. Now you own 25%.

Then whats the point of buying a stock if it doesn't even entitle you to ownership of a company?

There's for example non-voting stock where you only participate in a potential exit or dividends.

Depending on the company bylaws you typically need at least a simple majority of the votes / stocks to issue new stocks. The company can also have a rule that says that existing share owners must have the right to purchase before everyone else, to "defend" their stake.

In general companies typically raise money because they think the cash infusion will benefit the existing shareholders in the long run, either by not bankrupting or having the cash to do investments / move into new markets etc.

It does entitle you to ownership, you as an investor in the company presumably approved the issuance of new shares on the belief that the additional capital would make your investment worth more in the future.

At least in theory the extra cash raised by selling the new stock makes the company more valuable, so your shares remain worth the same before and after. Actual practice is a lot more nuanced - the company might not be able to sell the new stock at a high enough price, or they might spend the new money immediately on hookers'n'blow^W^W^W unsound investments.

what does ^W^W^W mean

Remove previous word

The other answer to this is correct, but a little more detail in case you're interested:

^W is a control code. This specific one represents the keys ctrl+w, a keyboard command in Vi and Bash among other things. It deletes the previous word. You often see something similar with ^H as well, which is a single-character backspace. https://en.wikipedia.org/wiki/Backspace#^W_and_^U has some more information about these.

Some people use them more to make visual jokes in written text, more or less the same way you'd use strikethrough formatting in text.

And in my experience ties in nicely with the fact that when a dumb terminal glitched or lost sync with the server, control codes would start to litter the screen instead of being interpretted. You'd see things like:

…thsi typo^Ŵ^H^H…

start to appear, sometimes followed by several random letters hit in frustration, before the final hard-reset of the terminal and resignation to the fact some unsaved work has been lost.

I wish there were more people like you on the internet.

Shares do not imply ownership but participation. That participation can take different shapes, depending on the type of shares and the bylaws of the company: some will be entitled to dividends, some will be entitled to voting on decisions, some will entitle to a form of ownership, etc etc.

It sounds like you are thinking of publicly listed companies which have to adhere to strict regulation, much different from privately held companies.

Even then, there are no guarantees. A company can simply be mismanaged and overvalued as we saw recently with this Danish airline: https://apnews.com/article/scandinavian-airlines-air-francek...

Now you own a smaller part of a more valuable company, given the the money is well spent. Your net worth shouldn't change much.

Either way, if you had a majority of the voting shares, you could've stopped the issue.

I thought that if the company is issuing new shares, it was customary to give first refusal to existing investors (a "rights issue"?)

There may be a preexisting contract between investors that grants this right of first refusal. In some scenarios (e.g. startup seed rounds) it is customary to require such a contract as part of the investment deal, however, if you don't contract for this right you don't have it, and it may well be that some shareholders (e.g. investors) have this right and other shareholders (e.g. initial employees) don't.

Entirely up to the company.

You can bring in investors, go in retirement, sell your company. So ownership of a company can change. One way of doing that is to sell shares, another way is to give new ones to the newcomers. I don’t know this precise story with Silver Lake, but emitting new shares and diluting past investors to inject cash into the company is sometimes the only solution to bring cash on the account.

You can always create more stocks, but that delays the value of each, so investors might not like that.

delays -> devalues, dilutes?

Conversely companies can buy back shares so each share is a larger percentage of the company.

Apple has been doing this aggressively for the past 10+ years.

It generally requires a shareholder vote to do this, so this is mostly a concern for someone who owns a minority stake in the company. And then it depends on the rules that are actually set up for the company as to what is and isn't allowed with issuing new shares. So it's very much a "read the fine print" situation.

Umm, is this still consequence free in USA?

Yes.

The most famous Interim CEO was Steve Jobs.

He was also employee #2 and #0 at the same time, so Quantum CEO?

He also aggressively recruited and hired the guy (Sculley) that got him fired from Apple on the first pass.

Amateur move on his part, hiring a 'MBA head' CEO

Tim Cook is also MBA and it looks like it is working fine for Apple.

I think he's good at operations. But he doesn't lead the same way jobs did. apple can still turn the crank, but I don't think they innovate like when sj was around. Jobs worked with the outside world well, and cooperating well with the rest of silicon valley.

I think apple is now heavily navel-gazing. Their products point inwards into their ecosystem, they don't interoperate, the customer is trapped, they have few choices. maybe I should say egosystem?

> I don't think they innovate like when sj was around

I would have agreed with this before the M1 Macbooks came out, but when it did it caused a big change in my opinion.

Compare them to when apple switched from powerpc to intel.

When that happened, basically the mac was a better pc, since you could run windows natively on your mac. The mac now shared hardware and software with the pc industry, and innovations transferred over, like graphics cards. Apple let its customers benefit from multiple ecosystems, and they have more choices.

The apple switch to arm, went the other way. how many PCIe cards from a pc work in a "mac pro"?

Yes but he spent a lot of time inside Apple and grew within it

The problems you have selling sugar water are not the same problems that Apple has today (or since Cook moved into the post).

yeah I know but issue is not MBA it is what kinda culture you come and where you are good. Selling sugar water (you need to be like super good at marketing) and leading tech firm need different skills.

I've read Sculley's book as a teenager and I remember that it made a big impression on me, even though I don't remember much. I think the PepsiCo part was really gripping.

Silver Lake being one of Unity's largest shareholders explains their recent behavior perfectly. It's a private equity firm whose sole concern is squeezing blood out of a rock.

Accidentally funny name

https://de.m.wikipedia.org/wiki/Silbersee_(Bitterfeld)

That's basically the reputation of a significant number of private equity firms. Their standard operating procedure is to load the company up with debt, cut R&D, cut investment into the product, cut wages and raise prices to increase short-term profits while pretending you're trying to turn around the company and save it. That's basically why Sears and K-Mart don't exist anymore[0] and why so many newspapers fired their journalists and replaced most of the local news with national news from the wire services[1].

[0]: https://www.cnn.com/2018/10/16/investing/retail-sears-privat...

[1]: https://www.stern.nyu.edu/experience-stern/faculty-research/...

Sounds like Twitter.

Elon's Twitter acquisition was exactly to do that but he muffed it.

Elon's twitter acquisition was a play to sell lots of incredibly overvalued TSLA stock without tanking the price.

May a lot of noise, declare you're done with Twitter's bots and BS, sell a ton of stock -- not because it's overhyped, no it's for Twitter -- and then back out of the sale.

And he would've gotten away except he tried to back out 3 times and they held him to it. So now he's got this trainwreck situation, and he's doing what he thinks is the right play, lemons into lemonade.

Everything except short-term profits. X seems decently focused on the long term, especially with subscriptions being introduced as a (new) revenue stream.

Also not sure about R&D, as I don't know what R&D Twitter was doing pre-acquisition, but there's been an extraordinary increase in the rate of addition of new features and changes to the platform.

> especially with subscriptions being introduced as a (new) revenue stream.

I don’t think that’s ever likely to offset the massive amounts of debt Musk offloaded to Twitter’s balance sheet to fund the acquisition.

> changes to the platform.

Likely one of the most horrible rebrandings in the history of corporate rebranding?

He fired the ML Ethics Transparency and Accountability team. They did a lot of high quality work on understanding bias in opaque ML models.

https://www.wired.com/story/twitter-ethical-ai-team/

Exactly. Most of the Twitter acquisition money was borrowed, and that debt is now sitting on the company's balance sheet as liabilities.

It confirms the concern. The board broad on someone to look after the needs of the largest shareholder

Silver Lake (along with Qualtrics founder Ryan Smith) bought Qualtrics after a dizzying sequence of planned IPO, acquisition by SAP, and then IPO. They're busily evicerating it, having just announced their second big round of layoffs, and apparently there gonna be even more job losses next March. Everyone I know there is planning their escape. What's hilarious is that this round of layoffs has impacted their ability to deliver on a major internal project because a key player was canned, so the project is now in hold (again).

I wonder how many of these $$$ people are looking at Musk and saying, 'hold on, we could do that too'. It's amazing how resilient a company can be to code rot and infrastructure stagnation. It takes a long time to kill a company, once it has a customer base and decent revenue streams. You could probably fire everybody outside strictly operational teams and simply coast along on the momentum for a few years, creaming off gigantic profits. And what the hell, jack up your prices too, right?

Musks takeover of Twitter is not a particularly compelling example of this model. In a year he’s cut revenue by 40% (with every month trending worse than the last), not made it cash flow positive even with massive cuts, and is burdened it with tons of debt while making it worth much less. Twitter may turn around but right now I can’t imagine corporate raiders are looking at it as a positive example.

https://www.reuters.com/technology/elon-musk-says-twitters-c....

https://www.reuters.com/technology/us-ad-revenue-musks-x-dec...

Well, Musk did several things in close succession.

Sure, he scared off advertisers by welcoming nazis onto the platform. That's not something you'd want to replicate.

But he also fired 80% of the workforce, and the product kept working. If you have some subscription software where users keep paying $$$$ whether you add new features or not - getting rid of 80% of those expensive developers could be pretty tempting.

This is an extremely common private equity playbook, that hasn’t seen as wide adoption in software as it has in other industries because there is a presumption that software clients aren’t particularly sticky and the software space allows faster innovation. Twitter is a story that confirms that bias (so far).

I think Unity is the next big test case. If users leave the platform in droves and revenue tanks it will continue to confirm the current hypotheses. That said private equity firms will keep trying it no matter what as the market biases make it an easier space to compete so I’m not sure it matters much to software companies.

Eh, software can be pretty sticky if your users have lots of files in your proprietary format nobody else can read.

A company that uses Photoshop, or Altium, or SolidWorks, isn't going to move off it easily. Hell, existing users will often initially be thankful when product managers stop moving the buttons every 6 months.

Of course you'll stop attracting new customers as your product gets surpassed - but there could be a lot of $$$$ to be extracted before revenue drops to zero.

I would argue that much of Microsoft is built around legacy applications and code that prevents moving to alternative solutions. A lot of companies do not want to spend the time and money to pivot, not have the labor to do so. The true tech debt is a hidden cost where change is a visible cost.

Oracle and MSSQL enterprise owned my last org.

SAP offered to migrate us -- on to their new HANA platform. Guess how much that would cost?

So we still have these ancient Oracle boxes and newish MSSQL kicking around. They should be entering high school before too long...

Private equity firms are already an absolute blight even before Musk's handling of Twitter. I've seen plenty of companies get purchased, completely gutted and then they try to extract maximum value from customers as quickly as possible before all customers abandon ship as the product(s) fall apart. They truly are scum.

Oh I agree. I just think that Musk upped the ante by not being a private equity firm and still outdoing them:

1. Fire most of the company

2. Introduce new charges (blue tick worked, but the API cost was just stupidly high)

3. Then start tearing into the platform, breaking shit

The 3rd bit is what's weird. Private equity don't usually want to destroy the product that they just bought. Perhaps he thought that Twitter needed to be simplified in order to be manageable with a skeleton crew, but it still doesn't explain a bunch of user-friendly changes or the lame "X" rebranding.