5 ms·

So the firm borrowed money to employees?

madamelic 4y ago
My understanding is that Bolt lined up loans for employees to cover employees' tax burdens due to exercising their options. In simpler words: Bolt helped employees take out personally guaranteed loans to give Bolt money. In the loan terms, if the employee leaves for any reason, the employee owes Bolt the entire loan amount within 90 days of end of employment.
- hoofhearted 4y ago
  Doesn’t all this smell ENRON’ish?
  - gruez 4y ago
    In what sense? Searching Enron's Wikipedia article I couldn't find any references to employees getting loans to buy stock. The only way they're similar is "dubious company crashes and burns, employee's equity turn worthless", but even then the similarity is limited because Enron was a case of fraud and bolt isn't (at least to my knowledge).
    - fnordpiglet 4y ago
      Enron, Lehman, and similar had serious pressure to buy company stocks including making it the default for a 401k contribution. But afaik there was no equity financing by the company. That said the culture was so heavy all in corporate stock many, many employees lost everything. Never hold company stock. If you work there you’re already incredibly long. Diversify.
    - solatic 4y ago
      A rather large number of Enron deals (where Enron purchased an asset) were denominated in Enron stock rather than in cash. Enron executives were compensated in stock, with additional bonuses based on the stock value. Everyone was happy until the stock started to dive, then many of the underlying deals that were denominated in stock reverted to cash because the stock price dropped too low, etc. It's Enron-ish because it's a deal that creates additional demand for the stock, then when the price of the stock rises, it's used as proof that doing deals with company stock is profitable to all parties, which makes it more enticing in the future. When the stock falls (always unthinkable), the rank and file are holding the bag.
  - Apocryphon 4y ago
    It’s less Enron and more like the financialization of everything. Companies have so much capital they start investing in other startups or try our harebrained schemes like this, rather than spending it on R&D.
  - hoofhearted 4y ago
    I was implying ENRON’ish in the sense of executives encouraging employees to take huge risks on over inflated sales numbers and the employees being left to hold the bag. Not in the sense of shell companies and widespread corporate corruption.
- gruez 4y ago
  > to cover employees' tax burdens due to exercising their options. Not just the tax burdens, the exercise price as well
  - yardstick 4y ago
    > Not just the tax burdens, the exercise price as well Sure, but the exercise price is effectively set by the taxman. If you set it too low, they’ll just charge more tax. See https://assets.fenwick.com/legacy/FenwickDocuments/409_Valuations_Stock_Options.pdf https://assets.fenwick.com/legacy/FenwickDocuments/409_Valua... “Employees, officers, directors and consultants who receive stock options with exercise prices that cannot be shown to be at or above the reasonably-determined FMV on the date of grant face immediate tax on vesting at a combined federal and state tax rate as high as 85% or more.” The game is rigged in the taxman’s favour. If the tax was calculated at the exercise (or grant!) date but only due upon sale of the shares (or using those shares as collateral to loans etc), the system would be a lot fairer. Especially for illiquid shares in private companies, where it may be years until you could receive cold hard cash for your shares.
- gitfan86 4y ago
  The alternative these people had was to not exercise their shares. Do we know when those shares expired? Could they have waited until an exit to buy the options?

My understanding is that Bolt lined up loans for employees to cover employees' tax burdens due to exercising their options. In simpler words: Bolt helped employees take out personally guaranteed loans to give Bolt money. In the loan terms, if the employee leaves for any reason, the employee owes Bolt the entire loan amount within 90 days of end of employment.

hoofhearted 4y ago
Doesn’t all this smell ENRON’ish?
- gruez 4y ago
  In what sense? Searching Enron's Wikipedia article I couldn't find any references to employees getting loans to buy stock. The only way they're similar is "dubious company crashes and burns, employee's equity turn worthless", but even then the similarity is limited because Enron was a case of fraud and bolt isn't (at least to my knowledge).
  - fnordpiglet 4y ago
    Enron, Lehman, and similar had serious pressure to buy company stocks including making it the default for a 401k contribution. But afaik there was no equity financing by the company. That said the culture was so heavy all in corporate stock many, many employees lost everything. Never hold company stock. If you work there you’re already incredibly long. Diversify.
  - solatic 4y ago
    A rather large number of Enron deals (where Enron purchased an asset) were denominated in Enron stock rather than in cash. Enron executives were compensated in stock, with additional bonuses based on the stock value. Everyone was happy until the stock started to dive, then many of the underlying deals that were denominated in stock reverted to cash because the stock price dropped too low, etc. It's Enron-ish because it's a deal that creates additional demand for the stock, then when the price of the stock rises, it's used as proof that doing deals with company stock is profitable to all parties, which makes it more enticing in the future. When the stock falls (always unthinkable), the rank and file are holding the bag.
- Apocryphon 4y ago
  It’s less Enron and more like the financialization of everything. Companies have so much capital they start investing in other startups or try our harebrained schemes like this, rather than spending it on R&D.
- hoofhearted 4y ago
  I was implying ENRON’ish in the sense of executives encouraging employees to take huge risks on over inflated sales numbers and the employees being left to hold the bag. Not in the sense of shell companies and widespread corporate corruption.
gruez 4y ago
> to cover employees' tax burdens due to exercising their options. Not just the tax burdens, the exercise price as well
- yardstick 4y ago
  > Not just the tax burdens, the exercise price as well Sure, but the exercise price is effectively set by the taxman. If you set it too low, they’ll just charge more tax. See https://assets.fenwick.com/legacy/FenwickDocuments/409_Valuations_Stock_Options.pdf https://assets.fenwick.com/legacy/FenwickDocuments/409_Valua... “Employees, officers, directors and consultants who receive stock options with exercise prices that cannot be shown to be at or above the reasonably-determined FMV on the date of grant face immediate tax on vesting at a combined federal and state tax rate as high as 85% or more.” The game is rigged in the taxman’s favour. If the tax was calculated at the exercise (or grant!) date but only due upon sale of the shares (or using those shares as collateral to loans etc), the system would be a lot fairer. Especially for illiquid shares in private companies, where it may be years until you could receive cold hard cash for your shares.
gitfan86 4y ago
The alternative these people had was to not exercise their shares. Do we know when those shares expired? Could they have waited until an exit to buy the options?