3 ms·

He says it cost him $100m. Is that because of the stock options he lost when he was fired? To have $100m in stock - he would have been a very early hire?

MBCook 10y ago
He said he worked there when there were 30 people so he must have been a very early employee.
eliben 10y ago
The article mentions he worked at a 30-person Facebook, so I guess that makes sense
paul 10y ago
Facebook is worth $350B, so $100M is only 0.03% equity. He likely had more than that, but the article is old so the number today could be more like $500M.
- huac 10y ago
  generally those %'s get diluted down with subsequent funding rounds
  - paul 10y ago
    Facebook didn't have that much dilution.
    - rhizome 10y ago
      Except in certain cases.
tajen 10y ago
It's important to purchase your vested options as early as possible. So they can't take your options back. Of course it's easier if you are resident in a jurisdiction where you have to pay the Capital Gain Tax when you sell.
- prostoalex 10y ago
  > Of course it's easier if you are resident in a jurisdiction where you have to pay the Capital Gain Tax when you sell. How does having to pay a tax make things easier?
  - tajen 10y ago
    You always have to pay the CGT tax (which is 13-30% in countries I know). The difference is whether you have to pay the tax every time the share price climbs, or only when you sell and pocket the added value. It's a serious problem in California. When you are granted options at $1 and the company IPOes with a valuation of $100 per share, all employees who have exercised their options are reputated having made a $99 gain. So they have to pay, say, $30 per share. But it's so virtual money, because they may not have $30x number of shares in cash. So those people are forced to either borrow money or sell their shares to pay their taxes. Worse: Employees often aren't allowed to sell during a lock-in period after the IPO, and they can't sell their shares at all before the IPO. So they are constrained to borrow. Worse: If the company loses momentum and comes back to $1 the next year, then they can't get reimbursed for the $30 tax they paid. So they're in for $29. Per share. Compare that to Australia. If an Atlassian employee was granted stock options, they only have to pay the CGT when they sell. It didn't matter that Atlassian went IPO in 2015, or that shares changed hands when the administrative location was moved to UK circa 2013 (which could have been considered an exit event in US). If employees keep their shares until 2080, they'll only have to pay the CGT in 2080 with the money they got from selling. Disclaimer: I'm not a financial adviser and I'm not saying that employees should sell their shares. As a side note, shares go from $1 to $10 partly because the company gets better than expected, and partly because they don't give dividends to employee-issued shares. A share valued $100 one year and $104 the next year is the same thing as another one which stays at $100 and gives you $4 dividends.
    - prostoalex 10y ago
      > When you are granted options at $1 and the company IPOes with a valuation of $100 per share, all employees who have exercised their options are reputated having made a $99 gain. So they have to pay, say, $30 per share. But it's so virtual money, because they may not have $30x number of shares in cash. You're describing AMT, and the reason it exists is to account for an obvious behavioral pattern, which is never to sell. The pattern gets more attractive with increase in wealth, as loans against the public securities pledged as collateral are widely available at sub-1% in current rate environment, e.g. https://www.interactivebrokers.com/en/?f=interest https://www.interactivebrokers.com/en/?f=interest While risky (with margin calls and what not), a loan against small portion of the portfolio is pretty tax-efficient, as loan proceeds are not income and are not capital gains. If what you're describing in Australia is correct, my guess is that it's a bug in Australian tax system, not a feature. Wait for a few multi-millionaires or billionaires to prop up, never sell a single share of their portfolio while making their living through portfolio loans, and see what the public and tax authorities have to say about that.

MBCook 10y ago

He said he worked there when there were 30 people so he must have been a very early employee.

eliben 10y ago

The article mentions he worked at a 30-person Facebook, so I guess that makes sense

paul 10y ago

Facebook is worth $350B, so $100M is only 0.03% equity. He likely had more than that, but the article is old so the number today could be more like $500M.

huac 10y ago
generally those %'s get diluted down with subsequent funding rounds
- paul 10y ago
  Facebook didn't have that much dilution.
  - rhizome 10y ago
    Except in certain cases.

tajen 10y ago

It's important to purchase your vested options as early as possible. So they can't take your options back. Of course it's easier if you are resident in a jurisdiction where you have to pay the Capital Gain Tax when you sell.

prostoalex 10y ago
> Of course it's easier if you are resident in a jurisdiction where you have to pay the Capital Gain Tax when you sell. How does having to pay a tax make things easier?
- tajen 10y ago
  You always have to pay the CGT tax (which is 13-30% in countries I know). The difference is whether you have to pay the tax every time the share price climbs, or only when you sell and pocket the added value. It's a serious problem in California. When you are granted options at $1 and the company IPOes with a valuation of $100 per share, all employees who have exercised their options are reputated having made a $99 gain. So they have to pay, say, $30 per share. But it's so virtual money, because they may not have $30x number of shares in cash. So those people are forced to either borrow money or sell their shares to pay their taxes. Worse: Employees often aren't allowed to sell during a lock-in period after the IPO, and they can't sell their shares at all before the IPO. So they are constrained to borrow. Worse: If the company loses momentum and comes back to $1 the next year, then they can't get reimbursed for the $30 tax they paid. So they're in for $29. Per share. Compare that to Australia. If an Atlassian employee was granted stock options, they only have to pay the CGT when they sell. It didn't matter that Atlassian went IPO in 2015, or that shares changed hands when the administrative location was moved to UK circa 2013 (which could have been considered an exit event in US). If employees keep their shares until 2080, they'll only have to pay the CGT in 2080 with the money they got from selling. Disclaimer: I'm not a financial adviser and I'm not saying that employees should sell their shares. As a side note, shares go from $1 to $10 partly because the company gets better than expected, and partly because they don't give dividends to employee-issued shares. A share valued $100 one year and $104 the next year is the same thing as another one which stays at $100 and gives you $4 dividends.
  - prostoalex 10y ago
    > When you are granted options at $1 and the company IPOes with a valuation of $100 per share, all employees who have exercised their options are reputated having made a $99 gain. So they have to pay, say, $30 per share. But it's so virtual money, because they may not have $30x number of shares in cash. You're describing AMT, and the reason it exists is to account for an obvious behavioral pattern, which is never to sell. The pattern gets more attractive with increase in wealth, as loans against the public securities pledged as collateral are widely available at sub-1% in current rate environment, e.g. https://www.interactivebrokers.com/en/?f=interest https://www.interactivebrokers.com/en/?f=interest While risky (with margin calls and what not), a loan against small portion of the portfolio is pretty tax-efficient, as loan proceeds are not income and are not capital gains. If what you're describing in Australia is correct, my guess is that it's a bug in Australian tax system, not a feature. Wait for a few multi-millionaires or billionaires to prop up, never sell a single share of their portfolio while making their living through portfolio loans, and see what the public and tax authorities have to say about that.