17 ms·

Ask HN: Anyone have stock option horror stories?

• dhosek 5y ago
  I have never had a stock option that was worth anything. As a result, I count their value as zero if they’re part of an employment offer, although it’s been a while since I’ve had them as a putative benefit as well.
  • marssaxman 5y ago
    Sensible. I do likewise.
    • drunkenmagician 5y ago
      Second that as well. Options are a 'nice, but show me the cash' deal for me too.
      • iancmceachern 5y ago
        Third, me too.
  • TameAntelope 5y ago
    Counterpoint; I would give serious pause to hiring someone who didn't think the stock options would ever be worth anything. You have the power to effect that outcome, and giving up that power makes me a decent amount less likely to enjoy working with you.
    • winrid 5y ago
      I worked my butt off for almost a decade under this mentality, built products that make almost 100m a year. I won't see a return probably for another 5-10 years. It's a scam, don't let people like this fool you. You can have a positive impact, yes, but put what you have control over first. Your happiness and compensation that you get twice a month.
      • 2143 5y ago
        > compensation that you get twice a month. I dug into this and was surprised to learn that salaries are paid every fortnight in USA. I wonder why. Does anybody know if this is the case even in FAANG companies? Where I'm from it's paid monthly. I think I prefer that.
        • willcipriano 5y ago
          Why do you prefer to wait longer to be paid?
          • LeonidasXIV 5y ago
            Because other payments are monthly (rent, ISP, mobile phone contract, subscriptions - at least in Europe), so having a constant money in <-> money out equilibrium makes sense. Unless these things are also charged every 2 weeks in the US.
            • checker 5y ago
              Plenty of US places pay twice a month, so you get the monthly budget consistency and get your money sooner.
            • beeboop 5y ago
              I think the idea in the US is that if you're having to wait an extra two weeks to get paid, you're essentially having to "float" half your monthly income all the time. This impacts people who are on the poorer end of the scale, and there's a very high percentage of Americans that don't have more than a few hundred dollars to their name.
          • 2143 5y ago
            I think it's more of a psychological thing for me. If I were to get my income every day, that would be very boring. On the other hand if I were to get my income once in 6 months, that would be horrifying. But 1 month seems to be a sweet spot. Double the amount half as often. Other utility bills come in monthly in my country (which is in Asia by the way), so that's a factor as well. But yeah, I can now kind of see the appeal of getting paid every 2 weeks.
    • croon 5y ago
      It depends. Future value is a risk, and the reward is usually granted to founders. If the stock options are offered as compensation assuming a value that amounts to a competing salary, that means you are taking on founder risk, but without founder award. Thus, either stock option compensation must be much larger than salary, or it should, as GP suggests, be counted as a potential bonus and nothing more.
    • thinkharderdev 5y ago
      The problem is that the relationship between your outcome as a holder of ISOs and the outcome for the company as a whole is pretty opaque. You have no idea what the companies cap table looks like, what sort of liquidity preference the VCs have and what are the various ways in which you can be diluted. If you want to offer people ISOs as a bonus/inventive (i.e. pay a market salary and throw in options as an extra) then great. But if you are asking people to trade off salary for a financial instrument that can't possibly be valued with the information available to then it is kind of shitty to be upset when someone gives them an implicit value of 0.
      • TameAntelope 5y ago
        What do you mean, "You have no idea what the company's cap table looks like"? Ask! I mean yeah, if you don't know those things sure, it becomes a lot harder to understand, but I've been given that information when I've asked so far, and I would pass that information along now as well.
    • allisdust 5y ago
      Then you honestly don't understand how screwed up common stock with its multiple clauses is. Not only can employees not significantly change the liquidation outcome of a company below certain level (leadership etc), but even if they could/will and the company ends up with a great liquidation event, the rewards to employees won't be proportional. Which makes the OP's worth zero comment a good way to compare between offers (at the least, assume only a percentage of the potential profits).
  • muzani 5y ago
    I tried to negotiate stock options as part of a compensation with an employer. They seriously considered it and almost gave in. After actually doing the research I realized, they would be worth nearly zero (there was some dodgy stuff on the financial records too). Then I decided to quit because it would be a waste of time and effort working there. Anyway, the moral I took from that was to seriously reconsider working at a place where the stock options are worth nothing. Probably consider consulting for them or something else more cash heavy.
  • Cthulhu_ 5y ago
    I mean I'd take stock options, but only as a bonus, not as a replacement or fill-in for a wage. I've got bills and a mortgage, after all.
• lkesteloot 5y ago
  The fair market value was $3 per share. I calculated my AMT to be $0 and exercised. The company then retroactively quadrupled their fair market value price and I suddenly had a $10k AMT bill. The company was private, so I couldn't even sell the shares to pay for it.
  • lutorm 5y ago
    Yup, the retroactive valuation updates for private companies can really screw you over.
  • deleted 5y ago
    [deleted]
• WalterBright 5y ago
  A friend of mine got a bunch of stock options, and exercised them. Then they tanked. He got hit with a tax bill so large it more than wiped him out. His family wound up in a trailer. Moral 1: When exercising options, sell enough on the same day to pay the tax bill. Moral 2: When dealing with large sums like that, consult with a CPA.
  • evdubs 5y ago
    Your friend couldn't sell the shares and take a capital loss to offset the options gain?
    • snypher 5y ago
      I think it is employee options, something like chunk of options convert to real shares (say $1m). Tax man asks hey, where's my eg $220k? Employee says it's ok, I have $1m (in shares). Something happens on the market and shares are now worth $0 (or sub-$220k). They still owe the $220k!
      • systemvoltage 5y ago
        Can you not take $1M loss? At one point, you had owned $1M of stock. It went to $0. That's a personal loss of $1M.
        • quickthrower2 5y ago
          Tax years is the issue I assume
        • trhway 5y ago
          [IANACPA] without 83b election the $1M gain on stock options on the moment of exercise goes into regular income while the $1M loss would go into capital loss. The limit on loss offset to the income is $3K/year. So in the first year there would be $997K of regular income to pay taxes from and $997K carry over loss. Without any other capital gains to use the loss against, it would take another 333 years to write that loss down.
• winrid 5y ago
  Joined a company with a billion dollar evaluation. They IPO'd a year after I joined, just months after exercising options. The stock tanked. The AMT taxes will likely be tens of thousands of dollars even if I don't sell.
  • nrmitchi 5y ago
    Tens of dollars? I'm assuming this is a typo of some sort
    • winrid 5y ago
      Ha, I wish! Corrected.
  • tehlike 5y ago
    Oh this is due to growth crash in the last few months? That sucks :(
    • winrid 5y ago
      Nah this was like 2021. It was an SPAC merger that tanked.
  • devoutsalsa 5y ago
    I've had stock worth money in three different companies. Whenever I exercise, I immediately sell. I'm not willing to accept the downside risk, and I view the short term tax liability as the ultimate first world problem.
    • winrid 5y ago
      Yes, selling right away can be the way to go. I couldn't, however, until IPO. After IPO, similar competitors were doing very well, so I thought the company had a chance.
  • dehrmann 5y ago
    You didn't say if you're still above water. You won't likely owe any AMT if you close your position the same year that you exercise, though if it went down, you'll be carrying that loss for a while. If you suspected they'd tank, there was really no reason to exercise early. If an IPO looks eminent, you should probably wait a few months to exercise to see how the market reacts. Exercising early is more interesting when you're leaving or if the company is a sure thing, the IPO is a few years out, and you're chasing long-term capital gains.
• michaelje 5y ago
  Is it considered a horror story if you realise the company likely won’t have a significant upside? If anyone wants to exercise some totally not worthless options… they expire in 2 weeks shrug
• quickthrower2 5y ago
  The only horror is how rarely they are given in “rest of the world ville”
• jedberg 5y ago
  Not me but my friends: My first job was at Sendmail. A few friends exercised all their options when they left, writing checks to the company for 6 months of salary. A decade later they company sold for a fraction of what they took from VCs, and no one made any money (and only the VCs got anything back). Ten years before they could finally write off their loss!
• robocat 5y ago
  Horror story: https://news.ycombinator.com/item?id=11200296 https://news.ycombinator.com/item?id=11200296 From danluu’s well argued article that options are mostly bad: https://danluu.com/startup-options/ https://danluu.com/startup-options/ With the opposite argument from yosefk in Israel: https://yosefk.com/blog/stock-options-a-balanced-approach.html https://yosefk.com/blog/stock-options-a-balanced-approach.ht... I agree with danluu, and strongly disagree with yosefk. My experience in New Zealand is the payoffs for equity are far worse because the rewards versus the risks are so bad (because VC is batshit mental in NZ), and I expect the problems are equally bad in other countries. The USA is an outlier.
  • drunkenmagician 5y ago
    Second that comment on NZ. The VC system there is still in its infancy, VC treat startups like they should be grateful to even have a conversation, then offer peanuts for a large stake. No wonder the more successful startups always go offshore for funding. Net result is that the opportunities for meaningful payouts are low. Great place to bootstrap, but you need to go offshore as soon as you launch.
    • robocat 5y ago
      Oh yeah. Another major problem I have seen is that generally VC/seed investors in NZ have over-inflated egos, coupled with a lack of knowledge/skill. I have seen multiple boardrooms force extremely poor decisions on their investments, crippling the companies they are trying to “help”. The same pattern surely happens in the USA, but I am guessing startups have some reasonable chance of receiving better governance. That said, I have seen not-fuck-you-money US investors living in NZ give extremely poor advice, so I don’t have unrealistic expectations of the quality of investors just because they are on the other side of the Pacific. Even worse, seed investors can miss out on great investment opportunities, because they lack the ability to spot winners.
  • creakingstairs 5y ago
    > because VC is batshit mental in NZ I don't have any experience with VCs in NZ but was planning to try out start up when I do return home. I'm interested in stories if you have some around VCs in NZ, just so I know what I would be getting into :D
• cbanek 5y ago
  I feel like just how people say always get a lawyer when you get some legal paperwork like a cease and desist - I say get a CPA when exercising options. Many times you can book them for a one time appointment, it'll probably run you somewhere between $150-$300. Totally worth it when I had to do it. (although no horror story here)
• bane 5y ago
  Not a terrible story, but I was an early employee in a startup and was given a small batch of options to start (and some measure every year as bonus) -- nothing exciting. I think the strike price was like a $.05 a share or something with 20 million total shares and I had ended up with something like 20,000 shares. As I moved up the ladder I replaced a VP and took on his shares instead as an incentive. It was 1.5 million shares. One year I landed a couple huge deals for the company and brought in bonuses worth more than the strike price on all of that and almost bought them. While I was thinking about it, the executive in charge of marketing and sales left and I ended up meeting him in a local parking lot to pick up his laptop and some other things. He handed me and envelope and told me to give it to the CEO and that it was confidential. Being curious I looked in the envelope anyways and it was around 4 million shares in stock certificates in the company. I have no idea why they were being transferred but I'm sure it was some contractual contingency to return the shares based on some trigger in his contract. Being honest, I turned in the stock certificates as instructed, but decided that something felt "off" and I chose not to execute on purchase of my options. Over the next 12 months we tried to exit at a $25m valuation (which would have made me on paper at least a small time millionaire), failed to find a buyer, the CEO left, I became President of the company with the task to shut it down rendering my options worthless anyways. In exchange for sticking it out and helping shut the company down, I left with a very nice parting bonus and a promise of strong reference from our VCs as a former corporate officer which helped me get my next position with another startup (which ended in disaster but that's a different story). All that was worth well more than my options in the end so I guess it was worth it?
  • teruakohatu 5y ago
    Great story, but now I want to hear the story from the next disaster!
    • notum 5y ago
      Shares 2: The return of the dividends
      • ohmahjong 5y ago
• xrd 5y ago
  I worked for Real Networks in 2000. It was my first job out of college. I remember the recruiter probably thought she was clever telling me that "Your salary is low but you've got a lot of options." I had no idea what options really meant. I got 30000. In six months those options were worth $5M. Wired wrote up a great article by this guy who played a great practical joke on everyone. The greed was so bad, people would check the stock every five minutes. This guy setup a proxy, and when people went to the bathroom he would switch their proxy settings to point to his proxy. His proxy did one thing: take any numeric values and half them when the page had our stock symbol. People would return to their desk and freak out that they just lost half their portfolio value. I quit on my 1.5 year vesting date, and my options were still worth $150k. I waited a month and they went underwater. Oh well.
  • r1jsheth 5y ago
    hilarious
  • psyc 5y ago
    I took a job as employee #5 of a startup, in 2002. $50k per year and 1% of the company. I thought cool all we need to do is sell for like $100 and something million and I’ll be a millionaire, as we all agree is my birthright as a software developer. 3 years later I’m totally burned out and the company seems to be going nowhere. I agonize over giving up my 1% ticket if I quit. I quit. They did sell the company. 10 years later. For $28 mil. So I would have made an extra $28k per year on top of the $50k. To be clear, I came out way ahead by leaving.
    • break_the_bank 5y ago
      Assuming a standard vesting schedule of 4 years. Wouldn’t you have left with 0.75% of equity? I wonder if any money would have been left after dilution and preferred shares.
      • psyc 5y ago
        There was no vesting in this case. The shares were explicitly conditional on current employment when they became eligible to be exercised. Mind you I'm next to clueless about options, but I remember that language being in whatever I signed.
• mark-r 5y ago
  Just another anecdote. The company I worked for had pretty severe restrictions on when you could sell your stock, it was disallowed for some fixed time period before and after a major announcement. The company seemed to engineer their announcements so there was never an opportune time to cash out.
  • galkk 5y ago
    This is nice evil plan
    • mark-r 5y ago
      The best part was they blamed it on government regulations.
• Spoom 5y ago
  I got "phantom stock options". They were as advertised.
• dougb 5y ago
  I started at Akamai in July 2002 and I received an option grant as part of my offer. Since I had options before, I thought they were all priced at the closing price on the day they were approved by the board. But Akamai had a provision in their option agreement that priced the options at 4 different prices. The price of the first quarter of my stock was the closing price the day the grant was approved by the board. The 2nd quarter was priced 90 days later, the 3rd 90 days after that, and the final price as 270 days after the initial grant. No one mentioned this odd pricing during the interview process, and I never thought to ask about it in the interview process, I just assumed they priced them all at once like my previous options. I was told after I complained to HR, that they did this for MY benefit! Because their stock went straight to $300/share at the IPO and then started a slow decline. This was a good policy for people that started after the stock hit $300 and before I started because each quarter of their stock was priced lower than the previous quarter. But for those of us that started close to the bottom $2/share, it sucked! One guy who started after me quit when he found out about the 4 different prices.
• tptacek 5y ago
  Sure: famously, a bunch of people that paid to exercise their @stake options (@stake was one of the first large security consulting firms, funded by Battery Ventures) after they left the firm got zero when @stake was eventually acquired by Symantec; the deal carved out retention grants for existing employees, which of course weren't extended to former employees. A bunch of people were out 5 figures, as I recall. When I left Arbor Networks, I didn't exercise my options, in large part because of that horror story (further rationalized by having started a company of my own --- Matasano --- and deciding that if I was going to put money down on any company, it might as well be mine). I probably would have made some money when Arbor eventually sold! So: bad stories in both directions. :)
• throwaw87 5y ago
  I quit my job to start a company, trusting the legal to my business partner. We exchanged a written egalitarian cap table, but he secretly gave himself >100x more shares than listed. Yet, he called me "co-founder" and wrote that I held the most shares of anyone. In actuality, I vested <0.5%/year. Nearly a year in I found out, causing me to leave after having drained my savings in exchange for almost no equity.
  • beeboop 5y ago
    This sounds lawsuit worthy
• enigmatic02 5y ago
  Cost $300K total: $100K to exercise, $200K in paper gains. Looks like it will pay off bc valuation has continued to go up, but the 90-day exercise window is punishing for cashflow. Didn't know about 83b election, didn't make use of QSBS exemption; learnings here: https://www.productlessons.xyz/article/how-stock-options-for-employees-work https://www.productlessons.xyz/article/how-stock-options-for...
• gwicks56 5y ago
  The most famous must be the Skype story right? Have a bunch of language in the employment contract, which gives the employer the right to take back all the vested shares you have been granted if you are "fired for cause"? Then fire everyone for cause right before liquidity event. https://techcrunch.com/2011/06/26/skypes-worthless-employee-stock-option-plan-heres-why-they-did-it/ https://techcrunch.com/2011/06/26/skypes-worthless-employee-...
  • ed 5y ago
    That clause is impenetrable. Was there any follow up to this? I did some quick searches but couldn’t find anything. I did (sadly) find this video of Ben Horowitz defending the practice: https://youtu.be/4t1j83qQNoQ https://youtu.be/4t1j83qQNoQ
    • FatalLogic 5y ago
      >That clause is impenetrable. It was very obfuscated, and it was buried deep in thousands of words, but that's a big obvious red flag even if the legalese is impenetrable. If you ever notice a paragraph like that, which begins with some words like "If, in connection with the termination of a Participant’s Employment..." Don't sign it. Understand it, or find a lawyer who can. The very scary part is "termination of employment", because that's something out of your control, so you must assume it could be used to take advantage of you. This is an "IF .. THEN" statement where you have no control of the "IF" clause. So you'd best figure out the "THEN" part before agreeing to it.
      • lbriner 5y ago
        God bless the UK's Unfair Contract Terms Act 1977, which doesn't permit this kind of "well it's in the contract" excuse. In 2000, the High Court confirmed that this Act applies to employment contracts. There are also laws around termination of employment in general so I think that this would be easily rebutted in Court. https://en.wikipedia.org/wiki/Unfair_Contract_Terms_Act_1977 https://en.wikipedia.org/wiki/Unfair_Contract_Terms_Act_1977 nb: Not a lawyer by any stretch of the imagination
• eps 5y ago
  Happened to a friend of a friend who bought his vested and super-cheap options when leaving the company, while it was still private. This was in Canada, but the IRS wanted capital gain tax to be paid right away. And the cap gain was in millions, because of the current company valuation. I think he lawyered up and somehow found a way to defer the payment until the company went public. So it wasn't devastating per se, but still very unpleasant. From being an almost millionaire to a real chance of being bankrupt in a matter of days.
• winrid 5y ago
  I have a friend who, as an early employee, attempted to buy his options and the record of him ever having a vesting schedule was "lost". He would have to fight a legal battle to get the option to purchase his options.
  • tdy_err 5y ago
    This is filed with the IRS
    • winrid 5y ago
      Interesting, that makes complete sense and easier to fight. Too bad he didn't know that.
• derekja 5y ago
  it all worked out in the end, but when I left I had a few thousand options that were just barely in the money. Maybe $2k total. Unfortunately, they neglected to report the cost basis and the IRS sent me a $900k tax bill! It was certainly a heart-stopping letter to read.
• _nalply 5y ago
  This was fifteen years ago. I realized that something was coming up and decided to sell fonds titles. I opened the online banking system and sent the order. Two days later the crash happened. Have I been lucky? No. The bank patiently waited three days before executing the order. I am afraid they immediately sold the titles and kept the difference. After all no risk here. If the prices would have went up they just would have backdated the sell. I realized why bankers are rich. They have the power and can turn the game to their profit. They just have many possibilities to tweak something such that I lose. </tinfoil> Ten year later I retried somewhere else, crypto, to realize that the same crowd is also in crypto. Luckily I didn't go all in. Twice. I can afford the losses.
  • llampx 5y ago
    This... I can't even understand this. Couldn't you sue the bank/broker for this? Adverse execution?
    • _nalply 5y ago
      It's covered by their terms of service.
  • tluyben2 5y ago
    > to realize that the same crowd is also in crypto. If you bought btc/eth; so far the crypto believers have been right about one thing at least; when your holdings are down, just hodl. I am aware this can backfire terribly and I have no holdings, but for 12some years, they have been right.
    • attilaperez 5y ago
      Fresh buy-side momentum and value distortion such as Tether drive up the price. Once that flatlines or even slows down, you get hell. >for 12some years, they have been right. This is akin to a child counting on the toothfairy. https://protos.com/tether-papers-crypto-stablecoin-usdt-investigation-analysis/ https://protos.com/tether-papers-crypto-stablecoin-usdt-inve... ^ Very eye-opening look at the true playbook behind the crypto space. It's very much run by CBOE-derived quant firms running the economy like a casino.
• deleted 5y ago
  [deleted]
• clickee 5y ago
  Left a FAANG job for a dream job at a small company you've heard of for a large pay cut and .1% equity. Got fired 9 months later. No equity vested. Small company is now a $10 billion company. I'd be less bitter if I left at 3 months, but at 9, it hurt.
• agilob 5y ago
  Have you seen recent /r/wallstreetbets? https://old.reddit.com/r/wallstreetbets/top/ https://old.reddit.com/r/wallstreetbets/top/
• mkdirp 5y ago
  Young and naive story ahead so I apologise for any anger it might cause, cos I certainly get angry every time I think about it. First job after I finished university, and I joined a start up that looked relatively promising. It was my first my second corporate job, though the first was a terrible year in industry as part of my studies. Leadership gave lots of promises (not just to me) about the company and all, and honestly, I'm pretty sure in the early days much of it was okay to promise. I started on a relatively low salary. Got no options. Moved up the ladder, and got some options. It wasn't a lot, so I didn't think much of it. Heck, here in London, the stock options game for start ups is nowhere near as strong as the US (mind you, I didn't know about this back then either). I was never told about a strike price. I never read the options contract. Lots of mistakes on my part. About a year and a half after I joined, I got a sizeable pay increase because I suppose I had shown my worth maybe? I dunno. Right around that time, structure changed a little bit. I made the mistake of not checking my pay cheque to validate I had been given my pay rise. For about 6 months I hadn't been given my new pay. I raise it with the relevant people. Because we had hired someone new, and they couldn't find the new contract I'd signed (???), the new person had to go to the CEO to double check. That took another 2 months (don't ask me why). So I had about 8 months of the pay increase difference not paid, about ~£12k. They get back to me telling me they've confirmed that I was given the pay rise, but they won't be able to pay it in cash, and instead have to pay it in stock options. Without challenging it, I accepted, because I did believe the company would grow. Fast forward another 1.5-2 years, and I realise the company is a sinking ship, or if not, it's just drifting aimlessly. So I leave. I hand in my notice. Over the next week or so I have meetings with plenty of people to persuade me to stay with all the promises (not even a promise of a pay rise). I'm not persuaded, so our CEO straight up tells me I will lose my stock options if I leave. Didn't even get possibility get my money back. Nothing. 7/8 years later, the company is still drifting. Many aren't paid in full, or on time. It may have been a bunch of costly naive mistakes on my part, but from what I'm hearing it would have cost me more if I'd stayed. Moral of the story: you should double and triple check your contract, whether you're young or not.
• ncmncm 5y ago
  Over and over. Exercise options early to hold shares long enough to avoid capital-gains tax; but company is sold for cash, shares get converted instantly to cash, triggering Alternative Minimum Tax. It sucks. We ought to be able to sell our shares to our IRA as we exercise them. But we can't.
• supernova87a 5y ago
  No specific horror story. Just the fact that as a young employee in the tech industry I had no idea that ISOs trick you into thinking that they are something even distantly related to a regulated system of financial instruments. When in fact it's just a cover for "the CEO does whatever he wants" and your stock is pretty much arbitrary and has no guarantees whatsoever. Dilution (the biggest scam of all), valuation, down rounds, lock-up periods, etc. You go in (young) thinking that the appearance of financial instruments means they have some protection, but they don't. In fact, I sometimes think that this should be more heavily regulated, and why does the IRS/SEC bother to oversee some aspects of this but let the other aspects completely blow in the wind. But maybe that's just how this industry is, and no policymaker will care enough for this concerns of this specialized (and yes, fortunate and high-paid anyway) workforce. But at least go in with eyes open and informed.
  • allisdust 5y ago
    Good points. Employee protection in this space is desperately needed. At this point, employee stock options should just be called as NFTs probably as they probably carry similar risks /s
• Kaibeezy 5y ago
  2001. On my way out the door, the boss asked if I was planning to buy my options. I said I probably would. He shook his head and silently mouthed “Noooo”. Two weeks later our lovely VC punters shat out an 800-for-1 reverse. Thanks boss!
  • unlikelymordant 5y ago
    Sorry, whats an 800 for 1 reverse?
    • Kaibeezy 5y ago
      https://en.m.wikipedia.org/wiki/Reverse_stock_split https://en.m.wikipedia.org/wiki/Reverse_stock_split
      • unlikelymordant 5y ago
        How does the reverse stock split affect options, it would make each share more valuable wouldnt it?
        • toyg 5y ago
          It typically means the stock is tanking. If you know your $10 stock is going down, it looks better to merge it back into $1000 stock; this way, when it tanks, instead of $0.50 shares you get $50 shares - which look more presentable to new investors. Very roughly speaking, Split -> Stock is so good the company wants to cash in; Buyback -> Stock is still good enough that the company wants it back; Reverse Split -> Stock is tanking and company doesn't want to scare people.
  • cure 5y ago
    That was a good boss who cared about you.
• sideproject 5y ago
  Joined as employee #2 of a startup. Over the years, accumulated about 1.9% of the company shares. At one stage, the company was valued at ~$300M. Several buyers approached over the years, the chairman only wanted to sell at a ridiculous near $1B. So it never got sold. Several in-fightings, layoffs and a few years later, we exited with $18M acquisition.
  • cfontes 5y ago
    Oh man, that hurts. As much as when I rejected an early position and at least 1% of a company that is now worth $1 B, because they demanded me to shut down a website I had at the time that was remotely related to their business and doing well ( I was super proud of it, we where getting some news coverage locally and even offers to sell) I would probably have joined if it was not for that demand, I think. The most expensive thought of my life was "those fuckers will not tell me what to do". I don't regret it, since it led me to the best part of my life after that site was eventually shut down 3 years later, but man... Sometimes late at night, alone over a drink, it comes back and bites.
    • bluefirebrand 5y ago
      I think the software industry might be a lot better to work in if we collectively thought "These fuckers will not tell me what to do" more often.
  • moharoune 5y ago
    How much money you ended up with in cash ? Is it as straightforward as $18m×0.019 = $342k ?
    • lmm 5y ago
      Not necessarily, later investors may have liquidation preferences that would reduce it, potentially even to zero.
• bitL 5y ago
  Long time ago, promised 2% of the company with a 5 year cliff, got kicked out a week before cliff ended, company is wildly loved among developers around here too. Lessons learned, perspectives changed.
  • garagemc2 5y ago
    Name and Shame!
    • bitL 5y ago
      Nope, I decided not to ruin that company/destroy the project I co-created even if it made me super angry at times.
  • propter_hoc 5y ago
    5 year cliff?? That's not just not market, that's literally unheard of. What was your decision process in agreeing to such a term?
    • bitL 5y ago
      Salary was competitive, work was remote long before it was popular allowing me to travel around the world as I wanted, tech was top notch, I worked on main algos of a cool project and invented a bunch of new ones (friends at Google were jealous mentioning they can't get any such cool project), I could run profitable side-businesses without bosses caring about it if it didn't affect my perf, my work was showcased on HackerNews (once landing #1 spot, so good for self-marketing), just the end left a very sour taste in mouth... Afterwards I completely re-skilled to Machine Learning at three top 10 US schools including Stanford. The main drawback is that I no longer trust any tech company and try to be as independent as I can be.
• aqme28 5y ago
  We IPOd with a valuation of about 2B. By the time engineers could sell it had fallen to about 300M, and many early employees who were convinced to exercise pre-IPO ended up with nothing due to a very high pre-IPO value and AMT taxes.
• nickd2001 5y ago
  Not really a horror story, but a lesson. In 1998, worked in USA for startup, got stock options. Head a healthily sceptical attitude, only counted on salary which is real money. Nevertheless, I purchased the stock options, at $0.05 each thus spending $100, thinking "Be daft not to. Not convinced these'll be worth spectacular money but don't think I can lose". Then along came the telecomm and dot com busts. So lost whole $100 as the company was wound up. Felt possibly worth it for the schdenfrude of watching somewhat unkind / aggressive senior managers / investors losing big sums ;)
• mtremsal 5y ago
  https://www.chicagotribune.com/sns-tech-taxes-story.html https://www.chicagotribune.com/sns-tech-taxes-story.html Horror stories from the dot-com bubble. Mostly about AMT.
• tr4389 5y ago
  Worked for crypto startup in 2016. Went through divorce at that time, did not want to make shady investment, that could upset judge. Go figure :)
• JoeAltmaier 5y ago
  Friend had $10M in options. Never sold any, as it was going to only go up for sure. Company tanked, sold at fire sale, got $100,000 in the end. If you had the value of your stock option in cash, would you invest it all in a speculative Silicon Valley company? No? then diversify. And do it now.
• lbriner 5y ago
  Not exactly horror, because I did enjoy the ride but was CTO and employee 3 of a startup with a promising idea that didn't pan out. I had a good number of shares, although far fewer than the CEO and COO, would have been worth some good dosh if we had sold for £1M+. Incompetent leadership, no sales, Directors not stepping in soon enough and the company ended up selling for a small enough amount to pay back Directors loans with nothing for the shares. Annoying but you shouldn't fantasise about it unless you have a major input into the company success. If not, you are more likely to watch others fail and feel powerless and frustrated. We can all look back and wonder why we didn't buy 100 bitcoin when we first heard about it but we can't so work somewhere you enjoy, earn enough to be comfortable and if you do make some cash, great.
• swah 5y ago
  Bought BTC at 65K because it could only go up.
  • skhm 5y ago
    One more hype cycle and you'll be made even and then some, before the next crypto winter.
    • 0ldskool 5y ago
      "crypto winters" should only be a term if there is no technological progress (similar to ai winter) but because of crypto exchanges they refer to investment $$$..... The value on crypto exchanges in just dumb, pointless, and manipulated. Personally i always felt stock market and crypto exchanges are just mirror images of each other. Both are just scammy/scummy and its sad the the stock market isn't seen as such because its older and so ingrained into our society + economy. While there are legitimate uses for such a market (food and energy futures) they make up such a tiny tiny percentage of what its used for.
• sdnas211 5y ago
  I got stock options from a startup I was working for. 3 months later the company was bought out, and all our options were worthless. The icing on the cake was the founders holding a party to celebrate how rich they became from selling out.
• kylixz 5y ago
  With my own money I purchased approximately $15k in shares over the course of 8 years out of a 13 year tenure. Company was purchased by private equity. The CEO lost his crackers, I left, and it took the company 4 months to send me a first right of refusal with the value at $30k. Within that agreement, I had to sign away holding the company liable for anything and never threaten to sue — this is after the CEO torpedoed a job offer of mine, said some racist things, and sent me a cease and desist for a former customer calling me about a job offer. In any event, I still own the shares. I wish I didn’t because it would have been a cleaner break without a non-compete. But, I’m stuck… don’t want to sign away rights for what is my own money. Just holding onto them to see what happens as any legal fees outweigh what they are worth.
• momocowcow 5y ago
  First job. Joined a large multinational in the late 90s. Every new hire was given about $20k of in the money options right away. Option buy price at $20, share price at around $40. Within a year the SEC was investigating the top bosses. Stock price collapsed more than half. Options worth nothing. New management decided to restrike the price of the options for of many of my coworkers, erasing most of their loses. But mine were outside the magic period of time ://
• scelerat 5y ago
  Exercised about $35K of options soon after I left an IOT company that seemed very promising. A year and a half later they were acquired in a fire sale deal that wiped out all the investors. Don't play with money you can't afford to lose.
• a4a4a4a4 5y ago
  Took an offer for an early stage startup, ~0.25% of the company vesting over 4 years (best I could get at the time). Company proceeded to dilute 40-50% per round (pre-seed, seed, and series A) while bringing on an endless stream of do-nothing managers, and didn't top-up any of the existing employees grants or do any annual refreshers. They got upset with me when I brought this up. The company is floundering and hasn't launched anything technically new since a good amount of the original team left. I suspect it'll limp along for a few more years before it's acquired at a loss. The last funding round removed all but one of the founders from the board, so... too bad for them...
• deleted 5y ago
  [deleted]
• jefftk 5y ago
  I negotiated for more stock and less salary on joining (poor choice in retrospect) and exercised on leaving ($3k). Four years later they did a reverse stock split (90k:1) at a low valuation and I was forced to sell my shares back to them for $700. (Full details: https://www.jefftk.com/p/stock-options https://www.jefftk.com/p/stock-options)
• ninkendo 5y ago
  Tried to leave a FAANG, was offered huge handcuffs in the form of more RSUs. Left anyway a few months later for a startup at 0.5% equity. Left that startup in 9 months to go _back_ to said FAANG, leaving my startup options unvested. Returning to FAANG left me with less than half the RSUs I originally had (since then worth about $2m), and that 0.5% options in the startup? Said startup was bought right after I left and my options would _also_ have been worth about $2m. So I was ultimately right back where I started, having narrowly avoided lots of money two separate times.
  • coryfklein 5y ago
    Oof, that is just so painful to read. You have my sympathy, friend.
• Maro 5y ago
  My experiences: 1. Had my own startup, I was CEO. At one point we had a good LOI-valuation, I was a paper-millionaire. In the end we failed to raise, failed and I didn't make any money. But at least I didn't invest/lose any of my own money, and exited without screwing anybody over. Only lost money on oppty-cost, ie. money that I could have made if I had a regular job. 2. Worked at a resonably successful startup for 3 yrs, started in 2012. When I left in I exercised 10,000 pieces of stock for $5,000. It's now 10 yrs after my start date, no liquidity in sight, company is not doing so great. Probably what those 10,000 pieces stock will be worth is 1 month of my current salary, so it's irrelevant now. 3. Worked at Facebook for 18 months (London, E5). Vested arond $100k of stock, payed ~55% taxes, sold stock right on vest date, made around $45k. If I would have kept it and sold at the highest point of the stock, it could have been ~$150k. Today it'd be worth around ~$75k (FB stock was cut in half in the last 6 months). The upside of stocks: I do know people from Facebook who got early stock, and Facebook is the last job they'll have... 4. Worked at a delivery startup. At this point I was smart enough to ignore the stock and negotiate strong on the cash salary, so I made good risk-free money every month, but still vested a lot of stock. In the end the company failed, technically the stock was re-valued, so all my stock was worth something like $0.01. I did a great job managing my expectations, so I wasn't unhappy (I knew the CxOs are crooks and it's unlikely the company would be successful). 5. Current job at a non-tech BigCo doesn't have a stock component, just a high base salary, and no taxes (Dubai). This is the way. 6. The funniest stock story I have is from a job offer I didn't accept. This company gave me a reasonbly good offer with a stock component, where the stock contract had this specific language: > ... shares issued under this Plan shall be "hypothetical" stock, which means that the Company gives the Employee the benefits of owning stocks in the Company without actually giving the Employee stocks or shares certificates ... The contract had 3-5 clauses in there which said that the CEO could essentially decide to void my stock at any time for any reason. I told the CTO that these are red flags, he told me he agrees, he had the same concerns, but blah. In the end the structure of the stock plan was one of the reasons I declined, it was a red flag for company culture.
• lizknope 5y ago
  Not a horror story but just a disappointment story. I had options at $10. I joined and the stock dropped all the way to $0.57 before rebounding to $5 when I left 5 years later in 2005. During my exit interview the HR person says "Oh you have unexercised stock options." I told them to look at the current price and my option buy price. They withdrew the question.
• deleted 5y ago
  [deleted]
• pnw 5y ago
  First startup job in the dot com era, employee #30 at a pre IPO startup. Started same day as another guy I will call Steve. I got a nice stock grant but didn’t really understand it so I bought a few books and read up on options and AMT. Two years later and we are a public unicorn. I carefully exercised my options and sold my stock, keeping track of my taxes and paying an accountant just to be sure. Steve exercised his, held the stock and rode it down in the crash. Ended up completely bankrupting him, he lost everything due to a massive AMT bill. He’d used H&R Block to help with taxes and back then they had no idea about AMT. One thing I will add - I did fine but if I’d known about ETFs back then I’d be a lot wealthier. Don’t make the mistake of trading actively and especially don’t make the mistake of investing your tech gains in more tech until you have diversified enough that you don’t care if you lose it.
• AnimalMuppet 5y ago
  Not a horror story, but: I had some stock options. They were in the money. I sold some and kept some. The stock went up. I sold some more, but not all of it. I was keeping an eye on my yearly income and where I shifted into the next incremental tax bracket. On December 16 (of year X), the stock price was really attractive, but I was going to pay a higher tax rate on the gains if I sold, so I decided to wait until January to sell. On December 18, the company announced that it was buying another company. The stock market didn't like it, the price tanked, and I lost more than I would have paid in taxes. Moral: When money is growing on trees, pick it. But of course it's not that simple. In other circumstances, waiting could have been exactly the right move. But waiting carries risk, and I was not properly recognizing that risk.
• itbeho 5y ago
  Not sure if this is a horror story but it's an interesting recent dilemma. I started as a contractor for a startup about 8 years ago and was awarded some Non Qualified stock options that vested but were not exercised. I never came on board as an employee, but did do contract work from time to time. After a couple of years, I moved on to better opportunities, but the contract was never really terminated. The startup in question recently merged with a larger company and during due diligence my options were discovered. So.. they let me know I have these options if I wish to exercise them in the next 90 days. It looks like I'll have a taxable event just by exercising them as they are NQ. Not sure if it is really worth the risk as I still haven't been able to get a fair market value of the shares from them and I don't see the opportunity for them going public or being acquired any time soon.
• lamontcg 5y ago
  I had 2,500 stock option in AMZN in 2001 at a strike price of something like $7 or thereabouts that I sold all of them at around $40. Plus some RSUs and made around $100k. Thought retail margins would mean AMZN was never profitable and eventually that side of the business would crash and burn. Meanwhile, I figured that the trick to building out your own infrastructure cheaply (basically "just be really fucking cheap and fire people who do expensive shit like build out SANs") would catch on and the margins would disappear from the AWS/EC2 business as everyone just built out "internal clouds" for 10x cheaper than buying from AWS.
• busyant 5y ago
  Not quite a horror story... Over the course of about 7 years, I "amassed" options for about 100,000 shares ($0.10 each). I got laid off in the great recession of 2009 and I was pretty annoyed at being laid off (I won't go into details, but I felt that there were many others who deserved the ax before I did). After being laid off, I believe I had 6 months (maybe 12) to exercise my options. Obviously, it would have cost me $10K to exercise everything. But I was still annoyed and I decided to cut off my nose to spite my face: I exercised TEN DOLLARS WORTH (100 shares) for the petulant reason that it would simultaneously demonstrate that I had no faith in their viability and that it would cost them more than $10 in postage to invite me to yearly shareholder meetings. Well, I got my 100 shares and two years later, I also got notice that they were GOING PUBLIC!!! My heart SANK. Acting like a petulant child was going to cost me hundreds of thousands of $$$. Possibly millions, depending on how the IPO went. Then I read the fine print. The IPO was going to involve a 6000:1 REVERSE split. In reality, I would have had about 17 shares if I had exercised everything. Then, a few months later, the IPO was canceled. Eventually, I received a check for $0.01 because the reverse split of my 100 shares amounted to essentially nothing.
• PlatzmaPritzma 5y ago
  I got ~25K stock options from a startup while I was working as a Software Engineer. The company was sold so it was time to cash out the stocks $$$. My team was working on a separate side product than what the original company was doing. After company's exit, we learned that we will continue in a spin-off company instead of joining to the others. We agreed to leave the company, signed the papers etc. In the evening, I visited the stock brokers website in order to calculate how much money that I will get. $$$ I felt like having a cold shower when I saw that all of the stocks that I vested so far is gone. It is crossed with red mark and comment says: `Voluntarily given up.` I had a horrible night, trying to understand how this has happened to me. Next day, I learned that it is just an issue with the broker and I will get my compensation so I relaxed. That was my horror story.