5 ms·

Say you have $400K of public company stock that vests over 4 years. How much is this worth? (ignoring time value of money for now). $400K? But if the stock tank

Say you have $400K of public company stock that vests over 4 years. How much is this worth? (ignoring time value of money for now). $400K? But if the stock tanks then you likely have the option to get another job, so you are less affected by the downside than the upside. How should that factor into your calculation?

m_ke 5y ago
Tech stocks have done really well the last 10 years and will probably continue to do so. People who joined Snapchat a few years ago made over a million a year thanks to the appreciation.
MrKristopher 5y ago
It would be hard to find a job that pays $400k cash (yes I'm aware of Netflix) so there isn't much need to put a specific cash value on the RSU component for comparison. You're typically comparing two job offers which both have an RSU component. RSUs have a volatility component (so discount the value for that, depending on the value of the grant vs your net worth), but also RSUs generally appreciate over the vest (it's not too common for a stock to be down over a 4-year period) which is a plus.
sharpy 5y ago
Conversely, it can work out great for you. For example, Amazon stock used to go up 30-40% a year reliably. Compensation model was "conservative" and estimated 15% a year. So if you stayed at Amazon for a while, you could be paid very very well, thanks to stock appreciation. For the risk adverse, a strategy is to sell the stocks as they vest, effectively treating it as cash. Companies will also issue additional RSU, if stock tanks too badly, as they'd be losing people otherwise. Personally, I worked for Amazon and Microsoft for a number of years, and have kept all my RSU. It has worked out great for me (at least on paper).
iooi 5y ago
It depends how frequently it vests and what percentage vests every period. Amazon is notorious for vesting more of the grant towards the latter part of the vesting period with yearly vesting, while companies like Google are actually frontloading the grant and vesting monthly.

m_ke 5y ago

Tech stocks have done really well the last 10 years and will probably continue to do so. People who joined Snapchat a few years ago made over a million a year thanks to the appreciation.

MrKristopher 5y ago

It would be hard to find a job that pays $400k cash (yes I'm aware of Netflix) so there isn't much need to put a specific cash value on the RSU component for comparison. You're typically comparing two job offers which both have an RSU component. RSUs have a volatility component (so discount the value for that, depending on the value of the grant vs your net worth), but also RSUs generally appreciate over the vest (it's not too common for a stock to be down over a 4-year period) which is a plus.

sharpy 5y ago

Conversely, it can work out great for you. For example, Amazon stock used to go up 30-40% a year reliably. Compensation model was "conservative" and estimated 15% a year. So if you stayed at Amazon for a while, you could be paid very very well, thanks to stock appreciation. For the risk adverse, a strategy is to sell the stocks as they vest, effectively treating it as cash. Companies will also issue additional RSU, if stock tanks too badly, as they'd be losing people otherwise. Personally, I worked for Amazon and Microsoft for a number of years, and have kept all my RSU. It has worked out great for me (at least on paper).

iooi 5y ago

It depends how frequently it vests and what percentage vests every period. Amazon is notorious for vesting more of the grant towards the latter part of the vesting period with yearly vesting, while companies like Google are actually frontloading the grant and vesting monthly.