4 ms·

In my experience incentive stock options that companies give to employees normally are heavily discounted.

SeoxyS 11y ago
That, plus they've probably been granting RSUs for a while, which do not require being exercised and which cannot be underwater,
- x0x0 11y ago
  While they cannot be underwater, they were granted with a target comp in mind and a low enough IPO can put people well below the targeted value.
  - SeoxyS 11y ago
    Sure. I think that's fine; as long as people aren't losing money on taxes or exercise price. Equity compensation should always be viewed with the appropriate grain of salt—it's an investment, and most likely won't pan out. When the company kills it (Facebook, Apple), it turns everyone into millionaires. Square isn't there yet, though I'm sure a lot of people will have some very nice "bonuses" out of this.
    - x0x0 11y ago
      I wouldn't underestimate, if nothing else, the mental impact of being sold on a company with a major piece of comp being RSUs at a price, almost certainly derived from the last round raised, that are then worth a lot less. Obviously nobody will be out-of-pocket on them, but they got a salary much less than they were sold on. This can't work wonders for retention, and makes golden handcuffs more like paper handcuffs.
- potatolicious 11y ago
  Square was granting options as recently as 2-3 months ago for senior eng roles, I don't think many people at Square are hanging on to RSUs.
ar7hur 11y ago
From my experience it's hard to discount more than ~70% or the IRS starts to complain.
ChuckMcM 11y ago
It is a bit more nuanced than that. Employees are given options for Common shares rather than preferred shares. Since preferred have voting rights and other perks (like liquidation preferences) they are worth more than common. The value of common stock is determined by a 409a evaluation which takes a lot of different factors into account, but it is not unusual for Common shares to be valued at 1/10th the value of preferred shares.

That, plus they've probably been granting RSUs for a while, which do not require being exercised and which cannot be underwater,

x0x0 11y ago
While they cannot be underwater, they were granted with a target comp in mind and a low enough IPO can put people well below the targeted value.
- SeoxyS 11y ago
  Sure. I think that's fine; as long as people aren't losing money on taxes or exercise price. Equity compensation should always be viewed with the appropriate grain of salt—it's an investment, and most likely won't pan out. When the company kills it (Facebook, Apple), it turns everyone into millionaires. Square isn't there yet, though I'm sure a lot of people will have some very nice "bonuses" out of this.
  - x0x0 11y ago
    I wouldn't underestimate, if nothing else, the mental impact of being sold on a company with a major piece of comp being RSUs at a price, almost certainly derived from the last round raised, that are then worth a lot less. Obviously nobody will be out-of-pocket on them, but they got a salary much less than they were sold on. This can't work wonders for retention, and makes golden handcuffs more like paper handcuffs.
potatolicious 11y ago
Square was granting options as recently as 2-3 months ago for senior eng roles, I don't think many people at Square are hanging on to RSUs.

ar7hur 11y ago

From my experience it's hard to discount more than ~70% or the IRS starts to complain.

ChuckMcM 11y ago

It is a bit more nuanced than that. Employees are given options for Common shares rather than preferred shares. Since preferred have voting rights and other perks (like liquidation preferences) they are worth more than common. The value of common stock is determined by a 409a evaluation which takes a lot of different factors into account, but it is not unusual for Common shares to be valued at 1/10th the value of preferred shares.