13 ms·

Former Zoox employees sue, alleging rival offer was better than Amazon's

145 points by tempsy 6y ago

mobileexpert 6y ago
How would they possibly know the terms of either offer as former employees?
- cheez 6y ago
  Wei and Zhang are asking the court to order Zoox to open its books “in order to determine whether it is appropriate to pursue litigation against all or some members of the Board and/or Company management or others based on the apparent wrongdoing in connection with the Acquisition.”
- MacsHeadroom 6y ago
  As shareholders they may have a right to certain acquisition information, even if they aren't still employed. At the very least, current employees cannot be stopped from sharing such information with shareholders.
  - URSpider94 6y ago
    They can, actually. Almost all employees are required to sign an NDA as a prerequisite to employment. Disclosing company confidential information would at least be grounds for termination, at worst could expose the employee to a suit for damages.
    - asutekku 6y ago
      I mean if they do it anonymously enough, there're no consequences for them. Not right, but it's possible.
- harikb 6y ago
  If they exercised their stock options before they left the company, they receive all details (including executive comp). But they wouldn’t know what the other offer was. Btw this applies to those who are still employees too (if they explicitly bought vested options) My advice to anyone joining a startup - if you have the negotiating power, insists that you must pre-exercise and purchase all options immediately when you start your job. You must put some money, but if you don’t believe in the company, why spent years there. Most companies don’t like this and their VC will object. This is why I said “if you feel you have the power to ask that”. If you can’t do that, exercise as soon as they vest Edit: to clarify - this isn’t same as accelerated vesting. Vesting rules still apply - but you become a shareholder with appropriate rights.
  - kelnos 6y ago
    It's my understanding that early exercise is mainly only useful for tax purposes. You still won't be a shareholder until at least 1 share vests, which for a new employee, likely won't be for a year. Is that incorrect?
    - eanzenberg 6y ago
      Also, you’re prepurchashing common shares. These are only worth money if the sell price is over the valuation of the last raised round
      - chii 6y ago
        that's the risk of investing in equity. The employee needs to come to terms with it - there's no situation where this risk can be mitigated (without someone else taking a hit).
    - harikb 6y ago
      Yes, you are right about that. This situation is slightly better with AMT bracket moving up with Trump tax changes. But the basics still apply. I corrected by saying "vesting rules still apply". But the tax consequence (AMT or otherwise) will discourage one to exercise as the estimated stock price becomes bigger and bigger as the company grows. If you do month 1: Strike price = $1. Pre-exercise, file 83-b with tax. Pay 0 AMT. You quit after 2 years, get to keep half the shares, company might pay you back the principal for the lost half (yes, there is a risk there) If you do this 2 year when you quit, may be perceived value of stock is $10. Now you out-of-pocket cost = $1 + AMT tax on (income + $9). Moreover, you probably hate the company when you leave, so even more unlikely you will want to buy your options. I have friends who have lost $100k+ with that attitude. These days, AMT cut off is much higher, but this could apply to some of the valley's sought after engineers.
      - kelnos 6y ago
        It does depend on the cash you have on hand, though. If you can afford to pay that AMT, you'll get most of it back in credits over the following years. But I suspect many people wouldn't be able to cover that tax bill without selling those shares that they can't sell.
- Taniwha 6y ago
  Um, chances are the know people who work there
- deleted 6y ago
  [deleted]
bpodgursky 6y ago
> including employees who put in years at the company but left before May 2020. Zoox was founded in 2014. I mean, I don't want to get into the legal side, or even the ethical side, but on a practical note, former employees with stock should really expect to be at the very bottom of the pecking chain here. If you leave and hold stock, you're coming out in decent shape if you aren't completely screwed over. Like, Amazon doesn't care about you -- you're not joining the company. The startup doesn't care -- you've already left, there's no need to retain you. Even your former coworkers likely don't give a shit; you're profiting off of work they put in to get over the finish line (to paraphrase their thoughts). You kind of have to be on the rocket when it reaches orbit, to get the payout. I dunno what they're trying to accomplish other than make a few quick bucks to make them go away.
- tedivm 6y ago
  On the practical side breaking the law doesn't always work though. Shareholders are owners, and regardless of how they got their shares (vesting, purchase, gift, poker game) there are rights that go along with that.
  - bpodgursky 6y ago
    Sure, the right to get paid out the same as all other common shareholders. But will the company structure an acquisition so more of the payout is golden handcuffs than equity payout, if it's better for retention? Well, yes.
    - toomuchtodo 6y ago
      Will some shareholders sue? Probably. Will they recover any additional value? Maybe! Have to see how it plays out in court if a settlement doesn't occur first.
    - yibg 6y ago
      Following this logic, all acquisition should have 0 cash, with what would've been the money for the acquisition going to retention bonuses instead. This is definitely better for retention, and the share holders that aren't working there anymore? Well they aren't working there anymore so have nothing more to contribute right?
gibolt 6y ago
Would it matter? When presented options, they aren't required to choose the best on a given metric. They can choose any, as long as the votes align. Perhaps the founders believed their product would go further (not die) under Amazon or that they stood to benefit more from stock rewards long term
- MacsHeadroom 6y ago
  The board has a fiduciary duty to act in the interest of shareholders. If the shareholders were not part of a vote, ie. the board voted, then the board is potentially liable for damages.
  - WoahNoun 6y ago
    That is not true. It is a talking point that is repeated but has no bearing on reality.
    - traek 6y ago
      It is absolutely true that the board has a fiduciary duty to shareholders, and many states have statutes specifically protecting minority shareholder rights. Delaware is fairly unfavorable to minority shareholders though.
      - alextheparrot 6y ago
        If you’re hired by a Delaware Corp as a California resident holding shares in that company, wouldn’t the California rights be the ones the individual suing would have? Otherwise one state would have a monopoly based on it being business friendl... oh wait, maybe that is the case.
        deleted 6y ago
        [deleted]
        trytozoom 6y ago
colordrops 6y ago
Isn't it pretty common for early employees to be screwed down the line during IPOs and acquisitions? That's been my experience and that of many colleagues, and has been a topic here on HN over the years, driving the idea that working for a startup is usually not in your interests except for particular cases.
- dannyw 6y ago
  Doesn’t make it legal in the rare cases a competing offer is better for shareholders.
- throwearlyeng 6y ago
  I wish YC with all of its power and influence could try to change things for the better here. Early employees' blood, sweat, and tears, not to mention burning the midnight oil, often go into actualizing the founders' vision. Often these key early hires are alongside the founders working equally hard since day 10 or even day 1. I remember Sam Altman posting lamenting that the most talented engineers are more interested in working for FAANG than startups. If anybody could insist on their portfolio companies' founders writing founding team friendly employment contracts, it's him. While I'm against wealth taxes on principle, I can certainly understand the motivation for having them. I'm sure founders with fresh $100+M paychecks from acquirers can spare a few $M for those that believed in their vision enough to sacrifice the often-large opportunity cost of working for Google. One of the reasons Woz is a personal hero of mine (alongside his engineering brilliance) is that he made sure his colleagues who toiled in their garage were treated fairly. When Jobs and Apple's investors didn't spare any would-be lucrative Apple stock for said employees, Woz made sure to "give away" some of his own to them. I'd argue Woz was still compensated quite lavishly after the "damage". In fact, any YC startup that is currently having trouble hiring engineers might want to look into this. I would be interested in working for one that gave me more than 1% of the pie (alongside the usual "VP of Engineering" title that they always bestow to their first employee, which actually doesn't mean anything at all) as a founding eng. EDIT: Also kudos to Cruise, which is a YC company, for actually stepping in and offering to make the founding employees whole.
  - 6y ago
tempsy 6y ago
employees probably got nothing from the actual sale given they had raised $800M before the acquisition assuming standard liquidation preference terms, so can’t really blame them
rsweeney21 6y ago
The board of directors has a fiduciary duty to act in the best interest of ALL stock holder EQUALLY. The case law that established this was the Trados[1] case. If your company issues a huge bonus to executives for completing a sale of the company, you might have a case against the company. There are lawyers that make a very good living taking cases like this on contingency. I'm sure that's what these employees are doing in this case. [1]https://corpgov.law.harvard.edu/2013/09/03/delaware-court-of-chancery-upholds-trados-transaction-as-entirely-fair/ https://corpgov.law.harvard.edu/2013/09/03/delaware-court-of...
temporalparts 6y ago
One important factor in deciding which buyer for a startup, especially for the founders, is which company will most likely carry out the vision and mission of the original startup. For example, if the higher rival offer was from Yahoo/Verizon, then Amazon almost assuredly the right choice. This sucks for those employees though.
- asdfaoeu 6y ago
  That would be fine if only the founders were shareholders but there are also other shareholders.
supernova87a 6y ago
For all the ire on this site about the likes of Google, Apple, etc. screwing over the small company with their 30% app store fee, why isn't there even more outrage over the founders and startups who screw over their even more deserving-of-help employees? You know, the employees who get subjected to unregulated dilution, tyrannical bosses, unreasonable hours and unclear compensation for trading off the prime years of their life? The ones who sign papers that look like an official company that has rules and structures, only to find that it's really "whatever the CEO wants to do"? You would think people would be up in arms about that.
- Semaphor 6y ago
  Probably because people already tell you not to work at startups unless it is for ideological reasons.
  - cmrdporcupine 6y ago
    Part of the problem is the lack of good well paying employment options for engineers in small or medium sized companies and companies that are not FAANG. Especially outside of SV. Many of us at FAANG companies would love to leave, but it's getting increasingly hard to find good employers doing interesting work who a) aren't FAANG companies and b) aren't looking to be acquired by a FAANG company. In the Bay Area there are definitely more options, but outside of there sometimes you have to go to a startup just to find interesting work and a smaller, focused, team.
- notimetorelax 6y ago
  I think it’s sufficiently esoteric so that there’s not enough people to be up in arms.
- adrianN 6y ago
  Because Startups don't have a virtual monopoly on jobs the issue is much less pressing than with app stores. Of course that doesn't mean that programmers shouldn't form a union.
  - 6y ago

145 points by tempsy 6y ago

mobileexpert 6y ago

How would they possibly know the terms of either offer as former employees?

cheez 6y ago
Wei and Zhang are asking the court to order Zoox to open its books “in order to determine whether it is appropriate to pursue litigation against all or some members of the Board and/or Company management or others based on the apparent wrongdoing in connection with the Acquisition.”
MacsHeadroom 6y ago
As shareholders they may have a right to certain acquisition information, even if they aren't still employed. At the very least, current employees cannot be stopped from sharing such information with shareholders.
- URSpider94 6y ago
  They can, actually. Almost all employees are required to sign an NDA as a prerequisite to employment. Disclosing company confidential information would at least be grounds for termination, at worst could expose the employee to a suit for damages.
  - asutekku 6y ago
    I mean if they do it anonymously enough, there're no consequences for them. Not right, but it's possible.
harikb 6y ago
If they exercised their stock options before they left the company, they receive all details (including executive comp). But they wouldn’t know what the other offer was. Btw this applies to those who are still employees too (if they explicitly bought vested options) My advice to anyone joining a startup - if you have the negotiating power, insists that you must pre-exercise and purchase all options immediately when you start your job. You must put some money, but if you don’t believe in the company, why spent years there. Most companies don’t like this and their VC will object. This is why I said “if you feel you have the power to ask that”. If you can’t do that, exercise as soon as they vest Edit: to clarify - this isn’t same as accelerated vesting. Vesting rules still apply - but you become a shareholder with appropriate rights.
- kelnos 6y ago
  It's my understanding that early exercise is mainly only useful for tax purposes. You still won't be a shareholder until at least 1 share vests, which for a new employee, likely won't be for a year. Is that incorrect?
  - eanzenberg 6y ago
    Also, you’re prepurchashing common shares. These are only worth money if the sell price is over the valuation of the last raised round
    - chii 6y ago
      that's the risk of investing in equity. The employee needs to come to terms with it - there's no situation where this risk can be mitigated (without someone else taking a hit).
  - harikb 6y ago
    Yes, you are right about that. This situation is slightly better with AMT bracket moving up with Trump tax changes. But the basics still apply. I corrected by saying "vesting rules still apply". But the tax consequence (AMT or otherwise) will discourage one to exercise as the estimated stock price becomes bigger and bigger as the company grows. If you do month 1: Strike price = $1. Pre-exercise, file 83-b with tax. Pay 0 AMT. You quit after 2 years, get to keep half the shares, company might pay you back the principal for the lost half (yes, there is a risk there) If you do this 2 year when you quit, may be perceived value of stock is $10. Now you out-of-pocket cost = $1 + AMT tax on (income + $9). Moreover, you probably hate the company when you leave, so even more unlikely you will want to buy your options. I have friends who have lost $100k+ with that attitude. These days, AMT cut off is much higher, but this could apply to some of the valley's sought after engineers.
    - kelnos 6y ago
      It does depend on the cash you have on hand, though. If you can afford to pay that AMT, you'll get most of it back in credits over the following years. But I suspect many people wouldn't be able to cover that tax bill without selling those shares that they can't sell.
Taniwha 6y ago
Um, chances are the know people who work there
deleted 6y ago
[deleted]

bpodgursky 6y ago

> including employees who put in years at the company but left before May 2020. Zoox was founded in 2014. I mean, I don't want to get into the legal side, or even the ethical side, but on a practical note, former employees with stock should really expect to be at the very bottom of the pecking chain here. If you leave and hold stock, you're coming out in decent shape if you aren't completely screwed over. Like, Amazon doesn't care about you -- you're not joining the company. The startup doesn't care -- you've already left, there's no need to retain you. Even your former coworkers likely don't give a shit; you're profiting off of work they put in to get over the finish line (to paraphrase their thoughts). You kind of have to be on the rocket when it reaches orbit, to get the payout. I dunno what they're trying to accomplish other than make a few quick bucks to make them go away.

tedivm 6y ago
On the practical side breaking the law doesn't always work though. Shareholders are owners, and regardless of how they got their shares (vesting, purchase, gift, poker game) there are rights that go along with that.
- bpodgursky 6y ago
  Sure, the right to get paid out the same as all other common shareholders. But will the company structure an acquisition so more of the payout is golden handcuffs than equity payout, if it's better for retention? Well, yes.
  - toomuchtodo 6y ago
    Will some shareholders sue? Probably. Will they recover any additional value? Maybe! Have to see how it plays out in court if a settlement doesn't occur first.
  - yibg 6y ago
    Following this logic, all acquisition should have 0 cash, with what would've been the money for the acquisition going to retention bonuses instead. This is definitely better for retention, and the share holders that aren't working there anymore? Well they aren't working there anymore so have nothing more to contribute right?

gibolt 6y ago

Would it matter? When presented options, they aren't required to choose the best on a given metric. They can choose any, as long as the votes align. Perhaps the founders believed their product would go further (not die) under Amazon or that they stood to benefit more from stock rewards long term

MacsHeadroom 6y ago
The board has a fiduciary duty to act in the interest of shareholders. If the shareholders were not part of a vote, ie. the board voted, then the board is potentially liable for damages.
- WoahNoun 6y ago
  That is not true. It is a talking point that is repeated but has no bearing on reality.
  - traek 6y ago
    It is absolutely true that the board has a fiduciary duty to shareholders, and many states have statutes specifically protecting minority shareholder rights. Delaware is fairly unfavorable to minority shareholders though.
    - alextheparrot 6y ago
      If you’re hired by a Delaware Corp as a California resident holding shares in that company, wouldn’t the California rights be the ones the individual suing would have? Otherwise one state would have a monopoly based on it being business friendl... oh wait, maybe that is the case.
      - deleted 6y ago
        [deleted]
      - trytozoom 6y ago

colordrops 6y ago

Isn't it pretty common for early employees to be screwed down the line during IPOs and acquisitions? That's been my experience and that of many colleagues, and has been a topic here on HN over the years, driving the idea that working for a startup is usually not in your interests except for particular cases.

dannyw 6y ago
Doesn’t make it legal in the rare cases a competing offer is better for shareholders.
throwearlyeng 6y ago
I wish YC with all of its power and influence could try to change things for the better here. Early employees' blood, sweat, and tears, not to mention burning the midnight oil, often go into actualizing the founders' vision. Often these key early hires are alongside the founders working equally hard since day 10 or even day 1. I remember Sam Altman posting lamenting that the most talented engineers are more interested in working for FAANG than startups. If anybody could insist on their portfolio companies' founders writing founding team friendly employment contracts, it's him. While I'm against wealth taxes on principle, I can certainly understand the motivation for having them. I'm sure founders with fresh $100+M paychecks from acquirers can spare a few $M for those that believed in their vision enough to sacrifice the often-large opportunity cost of working for Google. One of the reasons Woz is a personal hero of mine (alongside his engineering brilliance) is that he made sure his colleagues who toiled in their garage were treated fairly. When Jobs and Apple's investors didn't spare any would-be lucrative Apple stock for said employees, Woz made sure to "give away" some of his own to them. I'd argue Woz was still compensated quite lavishly after the "damage". In fact, any YC startup that is currently having trouble hiring engineers might want to look into this. I would be interested in working for one that gave me more than 1% of the pie (alongside the usual "VP of Engineering" title that they always bestow to their first employee, which actually doesn't mean anything at all) as a founding eng. EDIT: Also kudos to Cruise, which is a YC company, for actually stepping in and offering to make the founding employees whole.
- 6y ago

tempsy 6y ago

employees probably got nothing from the actual sale given they had raised $800M before the acquisition assuming standard liquidation preference terms, so can’t really blame them

rsweeney21 6y ago

The board of directors has a fiduciary duty to act in the best interest of ALL stock holder EQUALLY. The case law that established this was the Trados[1] case. If your company issues a huge bonus to executives for completing a sale of the company, you might have a case against the company. There are lawyers that make a very good living taking cases like this on contingency. I'm sure that's what these employees are doing in this case. [1]https://corpgov.law.harvard.edu/2013/09/03/delaware-court-of-chancery-upholds-trados-transaction-as-entirely-fair/ https://corpgov.law.harvard.edu/2013/09/03/delaware-court-of...

temporalparts 6y ago

One important factor in deciding which buyer for a startup, especially for the founders, is which company will most likely carry out the vision and mission of the original startup. For example, if the higher rival offer was from Yahoo/Verizon, then Amazon almost assuredly the right choice. This sucks for those employees though.

asdfaoeu 6y ago
That would be fine if only the founders were shareholders but there are also other shareholders.

supernova87a 6y ago

For all the ire on this site about the likes of Google, Apple, etc. screwing over the small company with their 30% app store fee, why isn't there even more outrage over the founders and startups who screw over their even more deserving-of-help employees? You know, the employees who get subjected to unregulated dilution, tyrannical bosses, unreasonable hours and unclear compensation for trading off the prime years of their life? The ones who sign papers that look like an official company that has rules and structures, only to find that it's really "whatever the CEO wants to do"? You would think people would be up in arms about that.

Semaphor 6y ago
Probably because people already tell you not to work at startups unless it is for ideological reasons.
- cmrdporcupine 6y ago
  Part of the problem is the lack of good well paying employment options for engineers in small or medium sized companies and companies that are not FAANG. Especially outside of SV. Many of us at FAANG companies would love to leave, but it's getting increasingly hard to find good employers doing interesting work who a) aren't FAANG companies and b) aren't looking to be acquired by a FAANG company. In the Bay Area there are definitely more options, but outside of there sometimes you have to go to a startup just to find interesting work and a smaller, focused, team.
notimetorelax 6y ago
I think it’s sufficiently esoteric so that there’s not enough people to be up in arms.
adrianN 6y ago
Because Startups don't have a virtual monopoly on jobs the issue is much less pressing than with app stores. Of course that doesn't mean that programmers shouldn't form a union.
- 6y ago