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Employees saw their share price go from $44 in June (private markets) to a range of $62-68 during the road show last month to an IPO at $72, to close today at $
by acchow 8y ago
Employees saw their share price go from $44 in June (private markets) to a range of $62-68 during the road show last month to an IPO at $72, to close today at $61.
Again, in less than a year, rose from $44 to $61 with a brief uptick to $72 in the middle.
How is that plummeting?
- ajayjain 8y agoLoss aversion tells us that gains and losses have different emotional impact. In particular, perceived losses supposedly have a strong negative impact on people. [1] If Lyft employees value their shares at the IPO price, they might be feeling a loss all the way from 72 to 61. [1] https://link.springer.com/chapter/10.1057/9781137544254_13 https://link.springer.com/chapter/10.1057/9781137544254_13
- c1b 8y agoYou’re just arguing for the sake of arguing. It’s a net positive. Positive is good.
- mrnobody_67 8y agoBut anchoring.... people anchor to the all time high.
- Bajeezus 8y agoHe's got an extremely valid point, and morale at Lyft IS low, largely because of the reason above. Definitely not arguing for the sake of arguing.
- aliston 8y agoThey are going to get hammered on taxes, though. The IPO price sets the income they are taxed on while the price in 6 months determines what they actually take home. The result is that if you’re in California and the stock price falls to 30ish, you effectively take home nothing.
- rocqua 8y agoWhy is stocked taxed at the IPO value rather than the current value? Relatedly, what happens if you simply sell the stock? Seems to me like that would just generate income you owe taxes on.
- aliston 8y agoEmployees get taxed on the value that they vest at IPO, but are locked up from selling for 6 months. The company withholds a percentage, effectively selling a portion at IPO, but it is less than the effective tax rate. I should clarify that this applies to RSUs, not options. Edit: something similar can happen with options as mentioned, but the mechanics are slightly different.
- nostrademons 8y agoFor RSUs the withholding should be in shares - if your effective tax rate is 40% and you vest 5 shares a month, they grant you 3 shares and immediately sell 2 to cover the taxes. If your effective tax rate was 30%, they'd round up, still sell 2 of them, but remit the cash in excess of taxes to your paycheck. At least that was how my Google shares worked. A higher IPO price works to your advantage, because the refund you get for fractional shares is worth more. You're also never in the position where you have to cover the (income) taxes for RSUs with cash from the stock sale, because the taxes have already been withheld in stock. You only have to pay capital gains when you sell.
- dmoy 8y agoExcept most companies (including Google) withhold supplementary income at 22% federal plus FICA, regardless of whether your marginal bracket is 22% or 35%+. Usually this results in significant underwithholding on RSU for federal tax.
- usaar333 8y agoYup, had this exact fear during my IPO. Fortunately, stock went up, so it was a win that I was underwithheld. I was and continue to be surprised companies release RSUs at IPO and not lock up expiry, the later of which avoids the tax risk.
- rickyc091 8y agoI'd like to point out that FB went through something similar within the first few weeks. And, the current day price is $177.