10 ms·
isn't that $200k/year in stock worthless anyways?
by ushakov 4y ago
isn'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.
- rzazueta 4y agoNot a loss, per se, but if you were told you were receiving $200k in compensation as RSUs, and they drop in value to $50k, you could argue that's a $150k loss. It's absolutely a loss when you factor that in as compensation for the effort and labor your produced for them rather than co-onwership of the company, which RSUs decidedly do not represent.
- 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.