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I remember reading about a nightmare scenario of earlier Uber employees having to give up hundreds of thousands (or possibly millions) of dollars because of how

I remember reading about a nightmare scenario of earlier Uber employees having to give up hundreds of thousands (or possibly millions) of dollars because of how their options were taxed. It has since changed, I believe, but it used to be that: Upon leaving the company, they would have 90 days to exercise options. If they'd been there for a couple years during the fast growth phase, it's possible they had (e.g.) $500k in options with a strike price at $10k. Uber prohibited secondary market sales, so if you exercised your options, you had to hold on to them until IPO. However, you;d have to pay taxes on the gains on those vested options despite being unable to sell them. Suddenly you were on the hook for $171,500 in taxes ($490k * 35%) plus the $10k to vest as you quit your job -- or else lose out on $318,500 in value on those options. It led to a real golden-handcuffs situation where engineers couldn't really leave without walking away from fortunes.

chimeracoder 9y ago
> Upon leaving the company, they would have 90 days to exercise options. If they'd been there for a couple years during the fast growth phase, it's possible they had (e.g.) $500k in options with a strike price at $10k. Uber prohibited secondary market sales, so if you exercised your options, you had to hold on to them until IPO. However, you;d have to pay taxes on the gains on those vested options despite being unable to sell them Unfortunately, this applies to every successful startup that issues options (instead of RSUs). It's not just Uber.
- mmanfrin 9y ago
  The difference is that in most situations you can sell vested options on a secondary market, Uber made it a contractual requirement on vesting that they could not be sold on any secondary market (they could only be sold back to Uber for the strike price).
  - chimeracoder 9y ago
    > The difference is that in most situations you can sell vested options on a secondary market, Uber made it a contractual requirement on vesting that they could not be sold on any secondary market (they could only be sold back to Uber for the strike price). After Facebook learned this lesson the "hard" way[0], that's actually pretty standard. Every startup started within the last 5+ years has this same provision in their options, if you read the fine print, and older companies all amended their option terms for new grants. [0] hard way for Facebook, not for the employees.
teej 9y ago
It’s worth noting that there are companies who will front you the cash to buy your options and cover tax, in return for a cut of the proceeds. People in this situation have options.
- mmanfrin 9y ago
  I read about these only in response to the situation a lot of engineers were in at Uber -- was this a thing prior?

chimeracoder 9y ago

> Upon leaving the company, they would have 90 days to exercise options. If they'd been there for a couple years during the fast growth phase, it's possible they had (e.g.) $500k in options with a strike price at $10k. Uber prohibited secondary market sales, so if you exercised your options, you had to hold on to them until IPO. However, you;d have to pay taxes on the gains on those vested options despite being unable to sell them Unfortunately, this applies to every successful startup that issues options (instead of RSUs). It's not just Uber.

mmanfrin 9y ago
The difference is that in most situations you can sell vested options on a secondary market, Uber made it a contractual requirement on vesting that they could not be sold on any secondary market (they could only be sold back to Uber for the strike price).
- chimeracoder 9y ago
  > The difference is that in most situations you can sell vested options on a secondary market, Uber made it a contractual requirement on vesting that they could not be sold on any secondary market (they could only be sold back to Uber for the strike price). After Facebook learned this lesson the "hard" way[0], that's actually pretty standard. Every startup started within the last 5+ years has this same provision in their options, if you read the fine print, and older companies all amended their option terms for new grants. [0] hard way for Facebook, not for the employees.

teej 9y ago

It’s worth noting that there are companies who will front you the cash to buy your options and cover tax, in return for a cut of the proceeds. People in this situation have options.

mmanfrin 9y ago
I read about these only in response to the situation a lot of engineers were in at Uber -- was this a thing prior?