4 ms·
Two-sided coin... pardon the pun. On one hand, liquidity means price volatility, employee-shareholder obsession with share price and erm... employee liquidity.
by netcan 8y ago
Two-sided coin... pardon the pun.
On one hand, liquidity means price volatility, employee-shareholder obsession with share price and erm... employee liquidity. IE employees aren't locked after vesting.
On the other hand, liquidity makes value real. Employees will trade salary for liquid options, even on 1-year vesting terms. For illiquid options, it's too risky for most employees to really treat options as salary alternative.
Also, share price obsession can sometimes worse in a no liquidity situation than it is in a liquid "price-ticker" scenario. Imagine being an early employee @ uber. You "own" 0.x% of $50bn, but no have other assets. If uber doesn't IPO, you don't get anything. You are way too invested in a very risky stock. Scary, especially in bad times.
A rising and falling price ticker would be bad for obsession. But, selling some shares would be good. You'd be less exposed.
- jerguismi 8y ago> Also, share price obsession can sometimes worse in a no liquidity situation than it is in a liquid "price-ticker" scenario. Imagine being an early employee @ uber. You "own" 0.x% of $50bn, but no have other assets. If uber doesn't IPO, you don't get anything. You are way too invested in a very risky stock. Scary, especially in bad times. Usually employees get salary as main compensation, then after that some options or other incentives. I have never heard of a compensation scheme where there wouldn't be any salary at all (for normal employees). I think it makes sense for employee to evaluate some valuation for the company stock, and decide for which valuation to accept the options/stocks as substitute for cash. Often the problem is that the employee lets the company do the valuation and takes that for granted. Very commonly employees are very risk-averse so it might make sense to valuate the options/stocks near zero. In that case it makes sense to just prefer salary and only take stock/options that would be granted in any case.
- deleted 8y ago[deleted]