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The stock has been historically more valuable than an equivalent amount of cash. For the most part, the historical trend of these stocks has been up and to the

by wan23 6y ago

The stock has been historically more valuable than an equivalent amount of cash. For the most part, the historical trend of these stocks has been up and to the right.

eloisant 6y ago
Well, if you make 400k at Netflix instead of 200k of cash + 200k of FB stock at Facebook, you can just buy FB stock by yourself with the Netflix cash...
- gkop 6y ago
  This analysis is missing the appreciation of the grant during vesting, which is material. The 200k of FB stock was granted as 800k over 4 years. So if the stock goes up just 10% a year, by the time the 1st year vests it's actually worth 220k, the 2nd year is 242k, 3rd year is 266k, and 4th 290k in stock comp due to appreciation. If it goes up more than 10%, effect is even more pronounced, plus with refreshers, you get a genuine golden handcuffs type situation.
  - BeetleB 6y ago
    It's not missing that analysis. The GP said if given $400K cash you could buy $200K worth of stock. Yes, FB stock will appreciate during vesting, but that's no different from me buying $200K of FB stock and simply holding on to it for a few years. The benefit of cash up front and you buying the stock is you can buy any stock and play this game, not just your own company's.
    - faang_employee 6y ago
      There's a difference, because you are given a number of RSUs at hire with some monetary value, so on this example you would be given RSUs worth of 800k at the time of hire, which would be 200k per year (they vest over 4 years). If we run this example just for 2 years you will start to see the difference: Year 1: At Netflix you get 400k in cash, you buy 200k of FB stock, so you have 200k cash, 200k worth of FB stock At FB you get 200k of cash and 200K worth of stock Year 2 - FB stock goes up by 10% so 200k of FB stock from last year is now worth 220k: At Netflix you got another 400k in cash and you will buy another 200k worth of FB stock. So now you have 400k of cash and 420k worth of FB stock At FB you get 200k of cash and 220k of FB stock, so now you have 400k of cash and 440k of FB stock. Also RSUs vests quarterly so you can (and should) sell it and invest in other things to diversify.
    - yibg 6y ago
      There is certainly pros to having cash as pointed out. The appreciation of stock though can be a benefit in that your 200k is still going to be 200k next year, while the 200k of RSU could be worth say 300k. So second (and third and forth) year you get 300k a year worth of RSUs, while still 200k worth of cash. So while yes first year of RSUs vs stocks you buy appreciates the same, subsequent years RSUs are worth more (if it keeps going up) because the # of shares granted is locked in. Of course the inverse is also true, if the stock price falls, the # of shares granted is still locked and the value drops.

by wan23 6y ago

The stock has been historically more valuable than an equivalent amount of cash. For the most part, the historical trend of these stocks has been up and to the right.

eloisant 6y ago

Well, if you make 400k at Netflix instead of 200k of cash + 200k of FB stock at Facebook, you can just buy FB stock by yourself with the Netflix cash...

gkop 6y ago
This analysis is missing the appreciation of the grant during vesting, which is material. The 200k of FB stock was granted as 800k over 4 years. So if the stock goes up just 10% a year, by the time the 1st year vests it's actually worth 220k, the 2nd year is 242k, 3rd year is 266k, and 4th 290k in stock comp due to appreciation. If it goes up more than 10%, effect is even more pronounced, plus with refreshers, you get a genuine golden handcuffs type situation.
- BeetleB 6y ago
  It's not missing that analysis. The GP said if given $400K cash you could buy $200K worth of stock. Yes, FB stock will appreciate during vesting, but that's no different from me buying $200K of FB stock and simply holding on to it for a few years. The benefit of cash up front and you buying the stock is you can buy any stock and play this game, not just your own company's.
  - faang_employee 6y ago
    There's a difference, because you are given a number of RSUs at hire with some monetary value, so on this example you would be given RSUs worth of 800k at the time of hire, which would be 200k per year (they vest over 4 years). If we run this example just for 2 years you will start to see the difference: Year 1: At Netflix you get 400k in cash, you buy 200k of FB stock, so you have 200k cash, 200k worth of FB stock At FB you get 200k of cash and 200K worth of stock Year 2 - FB stock goes up by 10% so 200k of FB stock from last year is now worth 220k: At Netflix you got another 400k in cash and you will buy another 200k worth of FB stock. So now you have 400k of cash and 420k worth of FB stock At FB you get 200k of cash and 220k of FB stock, so now you have 400k of cash and 440k of FB stock. Also RSUs vests quarterly so you can (and should) sell it and invest in other things to diversify.
  - yibg 6y ago
    There is certainly pros to having cash as pointed out. The appreciation of stock though can be a benefit in that your 200k is still going to be 200k next year, while the 200k of RSU could be worth say 300k. So second (and third and forth) year you get 300k a year worth of RSUs, while still 200k worth of cash. So while yes first year of RSUs vs stocks you buy appreciates the same, subsequent years RSUs are worth more (if it keeps going up) because the # of shares granted is locked in. Of course the inverse is also true, if the stock price falls, the # of shares granted is still locked and the value drops.