4 ms·
How did this screw people?
by throwbigdata 5y ago
How did this screw people?
- moneywoes 5y agoI’m guessing because the equity vests at 1 year, you can’t realize huge gains in stock prices
- gonehome 5y agoIf you reprice equity comp each year then you lose most of the upside. Compare the two following equity plans: Example Year 1: --- PLAN 1 FMV: $1 Strike: $1 Total #: 40k ISOs Vesting: 4yrs --- PLAN 2 FMV: $1 Strike: $1 Total #: 10k ISOs Vesting: 1yr --- In the second plan you get granted new equity per year targeting some total comp. This means if the equity goes up in value a lot in the first year, when your new amount is recalculated it'll be way less than 10k. Example Year 2: --- PLAN 1 FMV: $2 Strike: $1 Total #: 40k ISOs (10k vesting in year 2) Vesting: 1yr into 4yr period --- PLAN 2 FMV: $2 Strike: $2 (new grant) Total #: 5k ISOs (The 10k from the first year, and now half that # determined by new FMV for a cumulative total of 15k instead of 20k ISOs). Vesting: 1yr on new grant --- This lets the company keep the majority of the upside, taking it away from employees. It also hurts employees that stay longer or have a longer term interest in the company from capturing the value they helped create. And the more the company goes up in value, the worse the trade off becomes.