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Sorry, this is totally insane. The author said the strike price on his options is $0.27. Gitlab is preparing to IPO at about $66, which would make his 15,000 sh

Sorry, this is totally insane. The author said the strike price on his options is $0.27. Gitlab is preparing to IPO at about $66, which would make his 15,000 shares worth nearly $1 million. He's going to throw that away because he's disgruntled with the company? https://www.sec.gov/Archives/edgar/data/0001653482/000162828021019932/gitlab-sx1a2.htm https://www.sec.gov/Archives/edgar/data/0001653482/000162828... Edit: I thought this was a recent post, didn't realize this was from 2017.

beervirus 5y ago
The post is from April.
- deleted 5y ago
  [deleted]
- rvz 5y ago
  ...in (2017) before leaving GitLab. Tomorrow on the 14th of October 2021, GitLab is going to the public markets and will be priced around $60 - $66 a share. So this person threw away his $1m worth of stock options because of GitLab's culture. Oh dear.
  - compiler-guy 5y ago
    That's easy to say in hindsight, but most startups fail.
    - bpodgursky 5y ago
      Ehhh but... $4,000 to exercise the shares? You have to be REALLY REALLY confident a startup is going to 100% no-soft-exit fail to not take that bet, given the vastly positive payout even an acquihire exit would give, given how cheap that strike price is.
      - plorkyeran 5y ago
        $4,000 to exercise and $250,000 in taxes on shares that they wouldn't be able to sell for another four years. The AMT heavily punishes exercising options in pre-IPO companies.
        bpodgursky 5y ago
        In 2017 when making this choice, presumably the FMV would not have been anything close to what it is now, and there's little to no issue with AMT.
      - calvinlh 5y ago
        $4000 to exercise, but a lot more in taxes. Given that his shares were worth about 1/6 of what they are now, and assuming the FMV for tax purposes was about 1/3 that, he would have to pay income tax on $60k worth of paper gains. That's an additional 20-30k depending on the state.
    - edouard-harris 5y ago
      Most startups aren't valued at $1.5 billion, which GitLab was at the time this article was written. Once a startup reaches that valuation, it's already been mostly de-risked.
  - almost_usual 5y ago
    Not hard to make that at a FAANG org with RSUs in 4 years. If they had vested the entire amount that would be have been a decent exit.
    - outworlder 5y ago
      _sigh_
    - Closi 5y ago
      Any way you slice it it's a million dollars. 4 times your annual salary in one lump payment is a life-changing sum of money for most people.
      - deleted 5y ago
        [deleted]
javagram 5y ago
It’s from 2017. If he had a crystal ball he probably would have exercised the options, the post indicates he didn’t believe in the company back then. Not sure the point of posting it now, feels a little bit like dancing on his grave.
- hnuser847 5y ago
  Got it, didn't see that.
- relaunched 5y ago
  ouch
lavezza 5y ago
The article is 4 years old. I'm not saying it was a smart move, but at the time he would have had to pay taxes that he might not have been able to afford. I know people that left SpaceX options on the table because they couldn't afford the taxes.
- TuringNYC 5y ago
  I'm 99% positive there are entire companies dedicated to financing the tax bill for these types of taxes, just to get a cut of the equity. EDIT: See https://www.esofund.com/ https://www.esofund.com/ There are other newer places also like https://join.equitybee.com/ https://join.equitybee.com/ Also, brokers who create a secondary market for this equity will also arrange financing, but it depends on the "hotness" of the equity. SIDE NOTE: If you have SpaceX stock, and you're going to leave it on the table due to taxes, reach out to me and I can arrange for something also. But go to ESOFund, etc first of course - those are professional outfits.
  - loeg 5y ago
    Can you point to some example(s) of companies that finance exercising private company options?
    - TuringNYC 5y ago
      I edited my original post. See https://www.esofund.com/ https://www.esofund.com/ There are other newer places also like https://join.equitybee.com/ https://join.equitybee.com/
      - loeg 5y ago
        Thanks!
- compsciphd 5y ago
  how much was the 409a valuation in 2017? $2-$3 a share? 15000 at $3 is $45K. assume all profit, lets say between federal and state he had to pay 40% on that (assuming its not long term capital gains, might very well be, and he's in a high tax state and has a high yearly income). so he would have to pay another 18k at most on top of the few thousand to excercise his options). though possibly less, as I said about long term gains. 18k isn't a small chunk of change, but it should be managable by most engineers. going from 4000 (.27*15k) to 20+K is a big jump, but it shoudn't be what scares you away.
outworlder 5y ago
Let this be a reminder that the market could not care less about things such as ethics or keeping your employees happy and productive. Or the environment, or following laws, or anything else. It only cares about current and future numbers. You, as an employee, are a number - and a not very important one. If anything, the stock price tends to go up when a company announces layoffs(sometimes even if what prompted that was financial distress). The Borg Collective could go IPO on "Assimilation Enterprises Inc" and it would likely have an outstanding valuation. When making financial decisions, it's one thing to vote with your wallet. It's another thing to not want to 'invest' in a company because they wronged you in some way. It was a business transaction to them, it should be a business transaction to you. I get that the author had all reasons to think the company would go under (high churn for one, competition, etc), which would make his options worthless if that were the case. Ultimately though, he got offered a bunch of options for a small price. There are drawbacks to exercising them, as he pointed out. But the way he was personally treated should not have factored in his decision. I hope he bought bitcoins in 2017, at least.
mylons 5y ago
wouldn't his shares have likely been a little diluted in further rounds of funding?
- Elof 5y ago
  They would get diluted if the company did something like a three for one trade (which happened to me and I know Gitlab did not), but in the case of an IPO there isn't dilution. Dilution matters when a company is getting bought by another company.
  - blaisio 5y ago
    Actually, it is normal for there to be dilution in each funding round, including an IPO.
deleted 5y ago
[deleted]
rweichler 5y ago
He should have at least exercised exercised a single NSO for 27¢. At least then he'd be kept in the loop to a certain extent.

beervirus 5y ago

The post is from April.

deleted 5y ago
[deleted]
rvz 5y ago
...in (2017) before leaving GitLab. Tomorrow on the 14th of October 2021, GitLab is going to the public markets and will be priced around $60 - $66 a share. So this person threw away his $1m worth of stock options because of GitLab's culture. Oh dear.
- compiler-guy 5y ago
  That's easy to say in hindsight, but most startups fail.
  - bpodgursky 5y ago
    Ehhh but... $4,000 to exercise the shares? You have to be REALLY REALLY confident a startup is going to 100% no-soft-exit fail to not take that bet, given the vastly positive payout even an acquihire exit would give, given how cheap that strike price is.
    - plorkyeran 5y ago
      $4,000 to exercise and $250,000 in taxes on shares that they wouldn't be able to sell for another four years. The AMT heavily punishes exercising options in pre-IPO companies.
      - bpodgursky 5y ago
        In 2017 when making this choice, presumably the FMV would not have been anything close to what it is now, and there's little to no issue with AMT.
    - calvinlh 5y ago
      $4000 to exercise, but a lot more in taxes. Given that his shares were worth about 1/6 of what they are now, and assuming the FMV for tax purposes was about 1/3 that, he would have to pay income tax on $60k worth of paper gains. That's an additional 20-30k depending on the state.
  - edouard-harris 5y ago
    Most startups aren't valued at $1.5 billion, which GitLab was at the time this article was written. Once a startup reaches that valuation, it's already been mostly de-risked.
- almost_usual 5y ago
  Not hard to make that at a FAANG org with RSUs in 4 years. If they had vested the entire amount that would be have been a decent exit.
  - outworlder 5y ago
    _sigh_
  - Closi 5y ago
    Any way you slice it it's a million dollars. 4 times your annual salary in one lump payment is a life-changing sum of money for most people.
    - deleted 5y ago
      [deleted]

javagram 5y ago

It’s from 2017. If he had a crystal ball he probably would have exercised the options, the post indicates he didn’t believe in the company back then. Not sure the point of posting it now, feels a little bit like dancing on his grave.

hnuser847 5y ago
Got it, didn't see that.
relaunched 5y ago
ouch

lavezza 5y ago

The article is 4 years old. I'm not saying it was a smart move, but at the time he would have had to pay taxes that he might not have been able to afford. I know people that left SpaceX options on the table because they couldn't afford the taxes.

TuringNYC 5y ago
I'm 99% positive there are entire companies dedicated to financing the tax bill for these types of taxes, just to get a cut of the equity. EDIT: See https://www.esofund.com/ https://www.esofund.com/ There are other newer places also like https://join.equitybee.com/ https://join.equitybee.com/ Also, brokers who create a secondary market for this equity will also arrange financing, but it depends on the "hotness" of the equity. SIDE NOTE: If you have SpaceX stock, and you're going to leave it on the table due to taxes, reach out to me and I can arrange for something also. But go to ESOFund, etc first of course - those are professional outfits.
- loeg 5y ago
  Can you point to some example(s) of companies that finance exercising private company options?
  - TuringNYC 5y ago
    I edited my original post. See https://www.esofund.com/ https://www.esofund.com/ There are other newer places also like https://join.equitybee.com/ https://join.equitybee.com/
    - loeg 5y ago
      Thanks!
compsciphd 5y ago
how much was the 409a valuation in 2017? $2-$3 a share? 15000 at $3 is $45K. assume all profit, lets say between federal and state he had to pay 40% on that (assuming its not long term capital gains, might very well be, and he's in a high tax state and has a high yearly income). so he would have to pay another 18k at most on top of the few thousand to excercise his options). though possibly less, as I said about long term gains. 18k isn't a small chunk of change, but it should be managable by most engineers. going from 4000 (.27*15k) to 20+K is a big jump, but it shoudn't be what scares you away.

outworlder 5y ago

Let this be a reminder that the market could not care less about things such as ethics or keeping your employees happy and productive. Or the environment, or following laws, or anything else. It only cares about current and future numbers. You, as an employee, are a number - and a not very important one. If anything, the stock price tends to go up when a company announces layoffs(sometimes even if what prompted that was financial distress). The Borg Collective could go IPO on "Assimilation Enterprises Inc" and it would likely have an outstanding valuation. When making financial decisions, it's one thing to vote with your wallet. It's another thing to not want to 'invest' in a company because they wronged you in some way. It was a business transaction to them, it should be a business transaction to you. I get that the author had all reasons to think the company would go under (high churn for one, competition, etc), which would make his options worthless if that were the case. Ultimately though, he got offered a bunch of options for a small price. There are drawbacks to exercising them, as he pointed out. But the way he was personally treated should not have factored in his decision. I hope he bought bitcoins in 2017, at least.

mylons 5y ago

wouldn't his shares have likely been a little diluted in further rounds of funding?

Elof 5y ago
They would get diluted if the company did something like a three for one trade (which happened to me and I know Gitlab did not), but in the case of an IPO there isn't dilution. Dilution matters when a company is getting bought by another company.
- blaisio 5y ago
  Actually, it is normal for there to be dilution in each funding round, including an IPO.

deleted 5y ago

[deleted]

rweichler 5y ago

He should have at least exercised exercised a single NSO for 27¢. At least then he'd be kept in the loop to a certain extent.