9 ms·
Remember that Stripe changed its RSU grant structure a year or so ago, so this won’t negatively affect newer employees. Stripe gives out a fixed amount of $$ va
by thundergolfer 4y ago
Remember that Stripe changed its RSU grant structure a year or so ago, so this won’t negatively affect newer employees. Stripe gives out a fixed amount of $$ value of stock each year now. The typical recent senior hire will get around $200k a year in stock. Now that the valuation is lower, they’ll be granted more stock units than before, which is good. Getting granted fewer stock units at a ‘fake’ higher valuation would have been frustrating.
1. https://blog.pragmaticengineer.com/equity-for-software-engineers/ https://blog.pragmaticengineer.com/equity-for-software-engin... (Ctrl-F Stripe)
- ushakov 4y agoisn't that $200k/year in stock worthless anyways?
- ztratar 4y agoCan you clarify? How is $200k worth of something ever "worthless"?
- ushakov 4y agohow is something worth $200k if you can't sell it?
- wmf 4y agoYou'll be able to sell it eventually.
- deleted 4y ago[deleted]
- 0xEFF 4y agoMaybe, maybe not. If so, maybe for a profit, maybe for a loss.
- lostlogin 4y agoHow would you sell it for a loss?
- srpm 4y agoThe company can go public or be acquired at a lower price than it's currently (privately) valued.
- nazka 4y agoI think he means sold for less than what it was on paper at the beginning. Like you start to work there and it’s valued at 200k but then time passes and now it’s at 30k.
- Calavar 4y agoIf you are accepting stock or stock options as compensation, that's generally coming in lieu of cash. Maybe you had an offer somewhere else with $30k more in salary, but you took this offer instead because the projected value of the stock made the total compensation higher. If you sell your stock after 4 years for $50k, you have taken a $70k loss relative to the other offer.
- junofan 4y agoI’d love to count profits and losses relative to the best possible outcome in hindsight rather than the difference between what was spent to obtain an asset vs. what I got for it, but generally that’s not how the IRS sees things. A loss is not relative like that.
- kodah 4y agoI'm not quite sure what you're saying, but RSUs are only taxable at vesting, and are taxed based on their market value at vesting. If the companies stock is worth less per unit, then you are taxed less.
- tdy_err 4y agoMight not be the case here but, generally speaking, it's unfortunately not uncommon for stock option agreements to _require_ the recipient to exercise them at a certain time- in particular, when they leave the company who is granting them.
- askafriend 4y agoI assure you, you will have no trouble selling Stripe stock at what its worth. There is a big appetite for Stripe shares in the secondary markets even if the company never goes public.
- bigcat12345678 4y ago[flagged]
- Spinosaurus 4y agoMany companies actually prohibit employees from selling shares to third party investors (including investors on marketplaces like EquityZen) without board approval.
- bogomipz 4y agoSure but usually if they refuse they have to buy them from you at the same price i.e right of first refusal.
- askafriend 4y agoThis is a really fair and important point - I appreciate you bringing it up. I've seen a couple of Stripe secondaries before so I assume that some set of employees are able to transact on the secondary market. However, important disclaimer that not all companies have the same terms - and the terms can change depending on when you were hired. Startup equity isn't absurdly complicated, but it very much is situation-specific which is where the confusion usually comes from.
- spoonjim 4y agoThey could be investor secondary sales which won't have the same restrictions.
- deleted 4y ago[deleted]
- magneticnorth 4y ago
- patmorgan23 4y agoYou can buy several acres of land in the middle of the desert for $200k.
- jiveturkey 4y agoAs an example, imagine you have $200k of crypto, held in custody at an exchange that has frozen withdrawals.
- rmk 4y agoNot exactly, but has huge valuation risk and is likely to end up being $50k all said and done. The trouble with equity is that it can fluctuate wildly in value and you only have yourself to blame (because the decision to sell is ultimately yours, and there can be a lot of anxiety and regret attached to it).
- ushakov 4y agomost of the startups that offered me stock options had completely exaggerated valuations, so... my heart goes to engineers, who joined a startup on bold promises to make it, but never got to IPO, M&A or even worse - were forced to execute options to later sell them at loss
- rmk 4y agoThis happened to me as well. Ridiculous billions+ valuations for companies that have not much of a moat and questionable market sizes, plus competition. Consequently the stock grants were for laughably thin slices of the company for massively inflated "Fair" Market Values per share, not to mention below-average salary offers. Basically, many startups think employees are only too willing to assume inordinate amounts of risk to make founders and their cronies rich while putting their futures on the line, and expect employees to be grateful they are given such opportunities. F that.
- nowherebeen 4y agoSo many startups never IPO, and their stock options are effectively $0. When they leave they have a small window to exercise them and pay capital gains tax (with inflate valuation, this could be $100k or more). Anyone thinking of making money off stock options at pre-IPO startup are taking a get a) valuations are realistic b) startup will IPO. In this current environment, both are false.
- simonebrunozzi 4y agoIIRC, at Stripe, and other nice-minded startups, you have 7 years to exercise, instead of the usual 60 days.
- perlgeek 4y agoIt really depends on how easily you can sell it. For some shares, there is a private market, and typically the company has to approve of sales. If they do, and the market has willing buyers, no problem. If the company blocks every sale, it's worthless.
- beebmam 4y agoFrankly, I'd be fucking pissed off about this if I had options.
- ushakov 4y agoi'd imagine all the already executed options are now worth 28% less on paper, correct?
- Brystephor 4y agoI'm genuinely curious why you say this. Could you please elaborate? I've only worked at publicly traded companies. I don't understand how this wouldn't be the exact situation you'd want to be in. my understanding is this: 1. If you're granted options at price X, and the new share price is lower than X, you're under no obligation to exercise your options. So no real financial loss or cost to you. 2. If you're granted options at price X, and the new share price is higher than X, you're still under no obligation to exercise your options. So it's up to you now. 3. You've exercised options at price X and now it's less than that. Well that sucks. No significant different from publicly traded shares being bought and suffering a price drop. Granted, it's easier to sell your public shares at a loss for reducing tax liability on other capital gains. 4. If you exercised options at price X and it went up then yay, you're winning. 5. If you are ensured to have been given $X worth of options, and your options have dropped to $Y, and now you'll be granted options to cover the difference of $X and $Y, these latest options will be granted at a lower price, $Z, and therefore will be better priced overall. Which would mean you could now exercise the options granted at the higher price or the ones granted at the lower price. Doesn't seem like it really matters or affects anything since the net gain is the same for the year.
- anonymouse008 4y agoThink preferences - there’s no way a vc is getting diluted on the back end
- Brystephor 4y agoI'm not familiar with this. Are you referring to common vs preferred shares?
- ruraljuror 4y agoThis is why many Stripes on blind are not angry. They will get more shares next year.
- radicaldreamer 4y agoThey should still be angry because this company should’ve gone public and made them liquid a year ago.
- OgAstorga 4y agoShouldn't going public on an unrealistic market cap would cause more issues than benefits? Sure, a healthy exit is ok but later pressure to recover the market cap in the short term can cause heavy structural damages inside any org.
- throw125412423 4y agoI'd rather have cash in my bank account and work for a company that will suffer structural damage than see my hypothetical net worth go down 60%.
- arcticbull 4y agoYou're gonna love a job at Netflix :)
- repsilat 4y agoI think that's a more complicated explanation than necessary. If their private valuation is higher than their public valuation it means they can raise money more cheaply while private.
- echelon 4y agoTo the benefit of the company and the people that control Stripe, not necessarily the hard working ICs that would enjoy liquidity. The opportunity cost of this restriction on their lives is huge. Had they gone public two years ago, employees would have benefitted from a market of a lifetime, with equity in one of the best tickets in town. A lot of life changing early retirements and "Fat FIRE".
- bcx 4y agoPersonally, I don't see what the hubbub is about. A 409a is a standard instrument used to price options, a standard approach to a 409A valuation is the base the value of a company on its comparables, including public comparables. If I were conducting this valuation, I haven't done this myself, but I most definitely read our 409A valuations closely. I'd imagine that the outside firm hired to conduct the analysis on Fintech would use data like: BLOCK (down 49% in last 6 months) PAYPAL (down 60% in last 6 months) COINBASE (down 75% in last 6 months) INTUIT (down 30% in last 6 months) VISA (down 5% in last 6 months) SHOPIFY (down 70% in last 6 months) Everyone at these fintechs, has seen the valuation of their company drop significantly (with the exceptions of VISA in the last 6 months. It's possible that stripe's performance is closer to VISA than to SHOPIFY, but only dropping 30% is likely pretty generous given the broader market. Anyone with options at any of these public companies is dealing with the same challenges.
- arcticbull 4y agoThere was a big shift over the last decade towards late stage startups and public companies issuing RSUs instead of options. Blonk stopped issuing options in like 2014. Coinbase is all RSU. Shopify is all RSU. The others I don't have personal knowledge of. It's possible someone is still vesting options from years ago but if so they're most certainly not underwater.
- JumpCrisscross 4y ago> Stripe changed its RSU grant structure RSUs are worth less than transferable stock. You can’t get liquidity for an RSU (or nontransferable stock) without using a forward, which may be illegal if you have less than a $10mm net worth. Options yield stock, however, which can be sold. For Stripe’s VCs, on the other hand, employees accepting RSUs makes their stock special. That increases the value of their shares.
- hef19898 4y agoRSUs are great at public companies, as soon as they vest they turn into regular shares. At a private company, well, it seems pretty hard to sell any shares in those isn't it?
- JumpCrisscross 4y ago> private company, well, it seems pretty hard to sell any shares in those isn't it? It’s a multibillion dollar market that all the banks are active in.
- hef19898 4y agoI honestly didn't know that... Well, no big surprise since I never had anything to do with shares in private companies my whole life...
- seanhunter 4y agoIt's still extremely expensive, slow and challenging to sell pre-IPO shares even in a major stock that has a lot of active liquidity.
- JumpCrisscross 4y ago> still extremely expensive, slow and challenging to sell pre-IPO shares even in a major stock that has a lot of active liquidity Sure. But "expensive, slow and challenging" liquidity beats no liquidity at all. Which is why few investors would agree to the lock-up terms of an RSU. (These terms make sense at companies which aren't going concerns, because they're young or going bust. They also make sense for executives at all stages. They don't make any sense for a multibillion dollar enterprise.)