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Seems to be normal form. I don't have enough fingers to count the number of times companies go public, primary investors exit, stock slumps. Employees who have

Seems to be normal form. I don't have enough fingers to count the number of times companies go public, primary investors exit, stock slumps. Employees who have been with the company several years get stuck waiting 6 months to sell any shares at which point the stock is well under water preventing an exodus of talent. It's completely by design. It would be more concerning if these stocks were spiking after IPO because it means the underwriters messed up and the market is irrational.

kasey_junk 7y ago
> Employees who have been with the company several years get stuck waiting 6 months to sell any shares at which point the stock is well under water preventing an exodus of talent. This is largely only true of employees paid in options right? I thought Uber had been using RSU for a long time, which would prevent 'under water' conditions.
- angstrom 7y ago
  They are, but there are still some startups that use options. At least the liquidation is easier with the RSUs, but it doesn't prevent the fall off post IPO as people wait (rightfully so) to see quarterly results employee cashouts before taking a stake in whatever the narrative is. Switching to RSUs was a good decision, particularly after so many Google employees were borked with underwater options around 2008 that took until about 2009 to correct.
btilly 7y ago
My experience is that employees who are underwater get demotivated and eventually just quit. That is why companies are switching to RSUs. However for AMT (Alternative Minimum Tax) purposes, the price as of your IPO is money you earned, even if you couldn't sell. Which during the dot com crash lead to a lot of people owing more in tax than they made, and with shares that couldn't be sold to cover it. I personally knew several who didn't have to pay taxes for several years afterwards because they were able to carry forward the losses from that disaster.
- angstrom 7y ago
  The long term capital gains loss is funny. I think I ended up with something like 30 years worth of LTCG losses I'll be able to carry forward. It's like a reminder that just keeps on reminding year after year how badly you can get shafted.
- mavelikara 7y ago
  Many firms who offer RSUs offer double-trigger RSUs (i.e. the RSUs vest only if the vesting period is met AND a liquidity event happens) to prevent these tax consequences you outline. These function as golden handcuffs too.

kasey_junk 7y ago

> Employees who have been with the company several years get stuck waiting 6 months to sell any shares at which point the stock is well under water preventing an exodus of talent. This is largely only true of employees paid in options right? I thought Uber had been using RSU for a long time, which would prevent 'under water' conditions.

angstrom 7y ago
They are, but there are still some startups that use options. At least the liquidation is easier with the RSUs, but it doesn't prevent the fall off post IPO as people wait (rightfully so) to see quarterly results employee cashouts before taking a stake in whatever the narrative is. Switching to RSUs was a good decision, particularly after so many Google employees were borked with underwater options around 2008 that took until about 2009 to correct.

btilly 7y ago

My experience is that employees who are underwater get demotivated and eventually just quit. That is why companies are switching to RSUs. However for AMT (Alternative Minimum Tax) purposes, the price as of your IPO is money you earned, even if you couldn't sell. Which during the dot com crash lead to a lot of people owing more in tax than they made, and with shares that couldn't be sold to cover it. I personally knew several who didn't have to pay taxes for several years afterwards because they were able to carry forward the losses from that disaster.

angstrom 7y ago
The long term capital gains loss is funny. I think I ended up with something like 30 years worth of LTCG losses I'll be able to carry forward. It's like a reminder that just keeps on reminding year after year how badly you can get shafted.
mavelikara 7y ago
Many firms who offer RSUs offer double-trigger RSUs (i.e. the RSUs vest only if the vesting period is met AND a liquidity event happens) to prevent these tax consequences you outline. These function as golden handcuffs too.