5 ms·

But the shares truly were worth basically nothing at founding. If he made the contribution for tax year 1998, then they hadn't even raised any money and therefo

by hagy 5y ago

But the shares truly were worth basically nothing at founding. If he made the contribution for tax year 1998, then they hadn't even raised any money and therefore there was zero external valuation. Anyone can found a company with a $1 market cap and have full ownership from their one dollar investment. But it's meaningless unless they turn that into an actually valuable company with a market cap in the billions. Thiel just got exceptionally lucky, in addition to a bunch of hard and smart work. I think this is a concept a lot of us struggle with when imagining the extreme wealth of the most elite tech entrepreneurs. Bezos, Gate, Zuck, and the rest all started with worthless companies and had substantial ownership as founders. Their wealth came from turning those large stakes in worthless companies into slightly smaller stakes into companies worth hundreds of billions.

sbierwagen 5y ago
Note there's significant limits on stock held in a Roth. Last I looked at it, you can't own more than 10% of the company, and you can't be an operating officer: 26 U.S. Code § 4975(2): (H)an officer, director (or an individual having powers or responsibilities similar to those of officers or directors), a 10 percent or more shareholder, or a highly compensated employee (earning 10 percent or more of the yearly wages of an employer) of a person described in subparagraph (C), (D), (E), or (G) The propublica article says Thiel put shares of his own company in his IRA. If true, that's not something you can do anyone.
jimmyswimmy 5y ago
We'd need more numbers to figure this out, but the article discloses that within the same month "the company sold a slice of itself to investors for $500,000." That should clearly establish the value of the company at the time. If that slice grew by a factor of 295, that is, the 500k divided by the 1.7k he invested, then he fairly valued the amount of stock he purchased. If not, the information presented suggests to me that he committed tax fraud. I don't know where to find the documents on Paypal's valuation and early ownership transactions to be able to dig further into this. One would imagine Propublica would have done so if it were feasible, and reported on it.
julianeon 5y ago
They weren't worth nothing, since they got investors to invest at 500k.
- maxk42 5y ago
  And that's why he paid for them.

by hagy 5y ago

sbierwagen 5y ago

Note there's significant limits on stock held in a Roth. Last I looked at it, you can't own more than 10% of the company, and you can't be an operating officer: 26 U.S. Code § 4975(2): (H)an officer, director (or an individual having powers or responsibilities similar to those of officers or directors), a 10 percent or more shareholder, or a highly compensated employee (earning 10 percent or more of the yearly wages of an employer) of a person described in subparagraph (C), (D), (E), or (G) The propublica article says Thiel put shares of his own company in his IRA. If true, that's not something you can do anyone.

jimmyswimmy 5y ago

We'd need more numbers to figure this out, but the article discloses that within the same month "the company sold a slice of itself to investors for $500,000." That should clearly establish the value of the company at the time. If that slice grew by a factor of 295, that is, the 500k divided by the 1.7k he invested, then he fairly valued the amount of stock he purchased. If not, the information presented suggests to me that he committed tax fraud. I don't know where to find the documents on Paypal's valuation and early ownership transactions to be able to dig further into this. One would imagine Propublica would have done so if it were feasible, and reported on it.

julianeon 5y ago

They weren't worth nothing, since they got investors to invest at 500k.

maxk42 5y ago
And that's why he paid for them.