Publications
Publications
- October 2018 (Revised September 2022)
- HBS Case Collection
Stock-Based Compensation at Twitter
By: Jonas Heese, Zeya Yang and Mike Young
Abstract
Olivia Nash, an analyst at leading hedge fund BlueShark Capital Management, had just finished listening to the hour-long earnings call for Twitter’s Q4 2017 results. Was Twitter doing well? That depended on which numbers she chose to believe. According to Generally Accepted Accounting Principles (GAAP), Twitter had recorded a $108M net loss for 2017. But on the earnings call, CEO Jack Dorsey and CFO Ned Segal had emphasized a slightly different and much better-looking metric: non-GAAP net income of $329M. This adjusted version of net income was a measure Twitter had defined itself when it first went public in 2013. The biggest difference between the two was that Twitter’s non-GAAP net income stripped out stock-based compensation expense. Olivia couldn’t help but wonder: Was stock-based compensation a true expense? Why did analysts and even regulators condone non-GAAP metrics? And, most importantly, how did the reporting of these metrics impact Twitter’s profitability and the way the company was managed?
Keywords
Twitter; Non-GAAP Disclosure; Stock-based Compensation; Earnings Management; Corporate Disclosure; Compensation and Benefits; Stocks; Measurement and Metrics
Citation
Heese, Jonas, Zeya Yang, and Mike Young. "Stock-Based Compensation at Twitter." Harvard Business School Case 119-032, October 2018. (Revised September 2022.)