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This is sort of similar to what Evergrande was doing with executives, right? IIUC, Evergrande strongly "encouraged" execs to take loans (secured against their

This is sort of similar to what Evergrande was doing with executives, right? IIUC, Evergrande strongly "encouraged" execs to take loans (secured against their income - which was considerable) to buy Evergrande "investment products". Obviously, this was just a way to pay employees with their loan. If things blew up - the employee is completely screwed. If things don't blow up (which seems unlikely when an employer has reached this level of desperation) - then it's still not clear it was worth the risk premium to the employee. This literally feels like something from a dystopian novel - where you take out loans to get your salary - and you only actually make money if your company grows 10x in one year - and even in that case your benefit is slim - while the VCs and founders walk off with 85% of the gains. Hardly anyone understands finance - and most people underestimate how greedy some people can be. I feel like there would be no end to suckers who would fall for this trap.

JumpCrisscross 4y ago
> where you take out loans get your salary - and you only actually make money if your company grows 10x in one year - and even in that case your benefit is slim - while the VCs and founders walk off with 85% of the gains Better: the VCs own stock with liquidation preference over the common stock they loaned you money to buy. If there's venture debt, they are also part of the estate that will be paid by those loans if the company goes bankrupt. This all smells. Especially given, to my knowledge, Bolt didn't let even its employees take liquidity in their shares through traditional channels.
- toomuchtodo 4y ago
  Can the SEC pursue Bolt for this?
  - berberous 4y ago
    For what? This thread is full of misunderstandings. What is it you think Bolt did that the SEC should pursue them for? If it’s alleged they fraudulently hid risks, etc., it’s one thing, but so far all that seems to have occurred is they offered something that has pros/cons, disclosed risks, half wanted to take the risk for the pros, and in hindsight, perhaps it was a bad deal since valuations are tanking industry wide.
    - JumpCrisscross 4y ago
      > what is it you think Bolt did that the SEC should pursue them for? Bolt offered, with multiple conflicts of interest, what are essentially margin loans to potentially unsophisticated borrowers. The $300 credit for a financial advisor the CEO tweeted about should, alone, be presumptive. To be clear, I don't think anyone did anything intentionally wrong. (Also, I learned about this yesterday, so there’s that.) But wanton incompetence bordering on--perhaps crossing into--negligence, enabled by a Board that absolutely should have known better, can and should create liability.
      - berberous 4y ago
        What conflict of interest? The company tried to do something beneficial for its employees, although perhaps it was misguided. They gained nothing here except the marketing benefit of trying to be employee friendly. Margin loans are risky because you can get liquidated and lose your other principal. This was a cashless loan, that was only 50% recourse, so the only risk is that you may have to pay back half of what you bought the stock at if it ends up worthless. I don’t think there was any incompetence or negligence here, and even if there was some incompetence, that’s not a theory of liability.
        JumpCrisscross 4y ago
        > What conflict of interest? Issuer is the lender is the employer. This is a mess of conflicts. > company tried to do something beneficial for its employees, although perhaps it was misguided I agree. (Though it ignores the stupidly simple, entirely common alternative: cut the loan crap and just give them the money.) > was a cashless loan, that was only 50% recourse, so the only risk is that you may have to pay back half of what you bought the stock at if it ends up worthless For that 50%, it’s identical to a margin loan. We regulate those because lending against magic numbers that go up is a consistent failure mode in capital markets.
      - chris11 4y ago
        Employers cannot replace financial advice from an advisor with a fiduciary duty. Providing general education is good, and so is getting them free sessions with a financial advisor. But I don't totally agree they should be liable. This was an incredibly risky program, and I don't understand how Bolt was valued last year. But engineers were potentially sitting on a life changing amount of money. Not exercising could have cost engineers hundreds of thousands in additional taxes if Bolt had a great IPO. They needed to get financial advice from an independent advisor.
  - fnordpiglet 4y ago
    No, and not just because it’s not a publicly traded security. They did nothing illegal. Maybe it should be but sadly it’s not.
    - JumpCrisscross 4y ago
      > it’s not a publicly traded security FYI, this is irrelevant with respect to the SEC's jurisdiction [1]. [1] https://www.sec.gov/oiea/investor-alerts-bulletins/ib_privateplacements.html https://www.sec.gov/oiea/investor-alerts-bulletins/ib_privat...
      - fnordpiglet 4y ago
        Your link outlined that unregistered securities don’t have oversight by the SEC and outlined how you better be careful what you’re getting into. It didn’t outline how the SEC regulates them beyond limits on what you can do with them without registering them. They wouldn’t be generally involved in non public shares agreements.
        JumpCrisscross 4y ago
        > unregistered securities don’t have oversight by the SEC The SEC created a safe harbor for registration. The Securities Act of 1933 regulates all securities [1]. This is why private companies issuing shares have to hire securities lawyers. [1] https://en.m.wikipedia.org/wiki/Securities_Act_of_1933 https://en.m.wikipedia.org/wiki/Securities_Act_of_1933
rangersanger 4y ago
>this was just a way to pay employees with their loan This feels like a more complex, insidious version of company scrip. At the end of the day, you’re getting paid in fake company money that’s worthless if they go belly up.
- onlyrealcuzzo 4y ago
  It is not worthless! That's typical startup equity (common stock for employees at least). The whole point is you're in debt (against worthless equity). It's negative worth!
  - deleted 4y ago
    [deleted]

JumpCrisscross 4y ago

> where you take out loans get your salary - and you only actually make money if your company grows 10x in one year - and even in that case your benefit is slim - while the VCs and founders walk off with 85% of the gains Better: the VCs own stock with liquidation preference over the common stock they loaned you money to buy. If there's venture debt, they are also part of the estate that will be paid by those loans if the company goes bankrupt. This all smells. Especially given, to my knowledge, Bolt didn't let even its employees take liquidity in their shares through traditional channels.

toomuchtodo 4y ago
Can the SEC pursue Bolt for this?
- berberous 4y ago
  For what? This thread is full of misunderstandings. What is it you think Bolt did that the SEC should pursue them for? If it’s alleged they fraudulently hid risks, etc., it’s one thing, but so far all that seems to have occurred is they offered something that has pros/cons, disclosed risks, half wanted to take the risk for the pros, and in hindsight, perhaps it was a bad deal since valuations are tanking industry wide.
  - JumpCrisscross 4y ago
    > what is it you think Bolt did that the SEC should pursue them for? Bolt offered, with multiple conflicts of interest, what are essentially margin loans to potentially unsophisticated borrowers. The $300 credit for a financial advisor the CEO tweeted about should, alone, be presumptive. To be clear, I don't think anyone did anything intentionally wrong. (Also, I learned about this yesterday, so there’s that.) But wanton incompetence bordering on--perhaps crossing into--negligence, enabled by a Board that absolutely should have known better, can and should create liability.
    - berberous 4y ago
      What conflict of interest? The company tried to do something beneficial for its employees, although perhaps it was misguided. They gained nothing here except the marketing benefit of trying to be employee friendly. Margin loans are risky because you can get liquidated and lose your other principal. This was a cashless loan, that was only 50% recourse, so the only risk is that you may have to pay back half of what you bought the stock at if it ends up worthless. I don’t think there was any incompetence or negligence here, and even if there was some incompetence, that’s not a theory of liability.
      - JumpCrisscross 4y ago
        > What conflict of interest? Issuer is the lender is the employer. This is a mess of conflicts. > company tried to do something beneficial for its employees, although perhaps it was misguided I agree. (Though it ignores the stupidly simple, entirely common alternative: cut the loan crap and just give them the money.) > was a cashless loan, that was only 50% recourse, so the only risk is that you may have to pay back half of what you bought the stock at if it ends up worthless For that 50%, it’s identical to a margin loan. We regulate those because lending against magic numbers that go up is a consistent failure mode in capital markets.
    - chris11 4y ago
      Employers cannot replace financial advice from an advisor with a fiduciary duty. Providing general education is good, and so is getting them free sessions with a financial advisor. But I don't totally agree they should be liable. This was an incredibly risky program, and I don't understand how Bolt was valued last year. But engineers were potentially sitting on a life changing amount of money. Not exercising could have cost engineers hundreds of thousands in additional taxes if Bolt had a great IPO. They needed to get financial advice from an independent advisor.
- fnordpiglet 4y ago
  No, and not just because it’s not a publicly traded security. They did nothing illegal. Maybe it should be but sadly it’s not.
  - JumpCrisscross 4y ago
    > it’s not a publicly traded security FYI, this is irrelevant with respect to the SEC's jurisdiction [1]. [1] https://www.sec.gov/oiea/investor-alerts-bulletins/ib_privateplacements.html https://www.sec.gov/oiea/investor-alerts-bulletins/ib_privat...
    - fnordpiglet 4y ago
      Your link outlined that unregistered securities don’t have oversight by the SEC and outlined how you better be careful what you’re getting into. It didn’t outline how the SEC regulates them beyond limits on what you can do with them without registering them. They wouldn’t be generally involved in non public shares agreements.
      - JumpCrisscross 4y ago
        > unregistered securities don’t have oversight by the SEC The SEC created a safe harbor for registration. The Securities Act of 1933 regulates all securities [1]. This is why private companies issuing shares have to hire securities lawyers. [1] https://en.m.wikipedia.org/wiki/Securities_Act_of_1933 https://en.m.wikipedia.org/wiki/Securities_Act_of_1933

rangersanger 4y ago

>this was just a way to pay employees with their loan This feels like a more complex, insidious version of company scrip. At the end of the day, you’re getting paid in fake company money that’s worthless if they go belly up.

onlyrealcuzzo 4y ago
It is not worthless! That's typical startup equity (common stock for employees at least). The whole point is you're in debt (against worthless equity). It's negative worth!
- deleted 4y ago
  [deleted]