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I don't work at one of the named companies, but do work at a company with RSU-heavy compensation that is currently down some 25%. It seems that many of my cowor

by Cerium 8y ago

I don't work at one of the named companies, but do work at a company with RSU-heavy compensation that is currently down some 25%. It seems that many of my coworkers are considering now that our compensation is cut, but that we are getting cheap grants now. Our grants are sized as a percentage of our base salary divided by the current price. Today's stock grants will be worth just as much as past ones but they will have the advantage of higher growth potential with market gains.

dunpeal 8y ago
So, your response is that these declines don't affect you very much since you have faith in future growth of your employer's stock value to compensate you for the current slump. (Your current grants are only "cheap" and valuable if you expect the stock price to not only bounce back, but also go higher in the foreseeable future.)
- joshuamorton 8y ago
  Not quite. Let's use Amazon as an example. If I believe the market price of Amazon should be 2k, which I believe it's hit, or at least gotten within spitting distance of, this current drop could be called a temporary dip (I'm not saying I necessary hold this view, but to demonstrate). Since Amazon is currently trading at 1.5k, if I get granted 30k in stock, I get 20 shares instead of 15, which when the stock returns to it's correct price, will now be worth 40k. I make 10k, just due to the bounce. Now this is impacted by a lot of specifics about how your are granted stock, options, or rsus, but that's the idea.
  - dunpeal 8y ago
    Sure, I totally agree with that. My comment was just to the effect that GP's comment implies that belief, i.e. that their employer's current stock price is undervalued (like how AMZN is currently trading for $1.5k but is actually worth $2k). Had they believed the stock is currently fairly priced, there's no reason to call these RSUs "cheap" or expect much excess return on them at vesting. Worst case scenario: if they're still overvalued, then further declines can be expected, and any grant denominated by RSUs is actually worth less than its nominal cash value.
fred_is_fred 8y ago
I don't know where you work, but as someone who has been in the industry 20 years - keep in mind - stocks don't always go up, and stocks can go to 0. I agree in general that getting more shares is better than getting less, but it's not a guaranteed win.
- dunpeal 8y ago
  That's a good comment. The best case scenario for tech employees is that this is just a temporary correction, and the bull market will resume after this short break. This seems to be the implicit assumption in GP, for example. However, there's no certainty that will be the case. The next few years could be a sustained bear market, in which stock prices appreciate very modestly. And while I wouldn't worry about stocks "going to 0" at a big corporation like Amazon, it's certainly possible for the smaller tech companies.
- askafriend 8y ago
  While it's generally a good rule of thumb for stocks, we're specifically talking about FAANG stocks here. None of those are going to zero ANY time soon. If they go to 0, we probably have an immediate global crisis on our hands. We're not talking about hyped startups here, we're talking about mature, global organizations that have fueled society's growth for the past 2 decades.

by Cerium 8y ago

dunpeal 8y ago

So, your response is that these declines don't affect you very much since you have faith in future growth of your employer's stock value to compensate you for the current slump. (Your current grants are only "cheap" and valuable if you expect the stock price to not only bounce back, but also go higher in the foreseeable future.)

joshuamorton 8y ago
Not quite. Let's use Amazon as an example. If I believe the market price of Amazon should be 2k, which I believe it's hit, or at least gotten within spitting distance of, this current drop could be called a temporary dip (I'm not saying I necessary hold this view, but to demonstrate). Since Amazon is currently trading at 1.5k, if I get granted 30k in stock, I get 20 shares instead of 15, which when the stock returns to it's correct price, will now be worth 40k. I make 10k, just due to the bounce. Now this is impacted by a lot of specifics about how your are granted stock, options, or rsus, but that's the idea.
- dunpeal 8y ago
  Sure, I totally agree with that. My comment was just to the effect that GP's comment implies that belief, i.e. that their employer's current stock price is undervalued (like how AMZN is currently trading for $1.5k but is actually worth $2k). Had they believed the stock is currently fairly priced, there's no reason to call these RSUs "cheap" or expect much excess return on them at vesting. Worst case scenario: if they're still overvalued, then further declines can be expected, and any grant denominated by RSUs is actually worth less than its nominal cash value.

fred_is_fred 8y ago

I don't know where you work, but as someone who has been in the industry 20 years - keep in mind - stocks don't always go up, and stocks can go to 0. I agree in general that getting more shares is better than getting less, but it's not a guaranteed win.

dunpeal 8y ago
That's a good comment. The best case scenario for tech employees is that this is just a temporary correction, and the bull market will resume after this short break. This seems to be the implicit assumption in GP, for example. However, there's no certainty that will be the case. The next few years could be a sustained bear market, in which stock prices appreciate very modestly. And while I wouldn't worry about stocks "going to 0" at a big corporation like Amazon, it's certainly possible for the smaller tech companies.
askafriend 8y ago
While it's generally a good rule of thumb for stocks, we're specifically talking about FAANG stocks here. None of those are going to zero ANY time soon. If they go to 0, we probably have an immediate global crisis on our hands. We're not talking about hyped startups here, we're talking about mature, global organizations that have fueled society's growth for the past 2 decades.