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Shopify lets staff decide cash-stock pay mix as shares dive
- mmastrac 4y agoI obviously don't want to give financial advice, but every time I've traded cash for stock in comp it's worked out for me in spades in the long run. This doesn't happen for everyone, it might not happen for you, but it's been very good to me on three separate occasions. Just remember that it's terribly illiquid and you're going to doubt your decision, potentially up to a decade later.
- dboreham 4y agoDo you mean "traded cash for stock"?
- bushbaba 4y agoThis is the same as statistically from loading a 401k out performs DCA throughout the year. Sure this year sucks, but if only 1-2 years out of 8 perform worse, BUT 6-7 years you perform better. Then holistically you’re still better off. When you invest look at the long term not short term.
- bumby 4y agoIsn't this dependent on timing and isn't part of the point of DCA to mitigate timing risks? E.g., If I loaded my 401k just before the bottom fell out of the market, you need a much higher proportion of good years to dig out from that hole. With DCA, you would have a shallower hole to climb out of. (Possible I misinterpreting what you meant, or that I am just not financially saavy enough to chime in)
- UncleMeat 4y agoBut on average the market goes up. You can lose with lump sum investment as early as possible. But you will be more likely to lose by waiting and only slowly purchasing in. The value of DCA is in emotional regulation since it softens swings at the cost of reduced expected value.
- bumby 4y agoDoesn’t this ignore the asymmetry in risk? The colloquialism is that a bull climbs the stairs and a bear jumps out the window. Implying there’s much more downside risk to bad timing than upside potential. Is there work on a risk-based comparison between the two?
- time_to_smile 4y ago> it's terribly illiquid I'm amazed at how many people that get a significant portion of their comp as RSUs hang on to their shares after vesting. During this insane bull market it's happened to work out, but having your income and a major portion (for most tech workers) of your assets perfectly correlated is absolutely a bad investment idea, not to mention the fact that you can only trade during approved windows and are not allowed to do any hedging (such as buying protective puts). Even if you're wildly bullish on your company, at the very least diversify a bit with highly correlated stocks (for example if you're a GOOG during the last decade at least split it up among other FAANG). This way you can at least protect yourself in the event that your particular company gets hit hard. It's incredible how far away the dotcom burst is in people's minds (or even 2008). Cheap money has led to an insane period of growth in tech, but investing as though that were the norm is very risky (without even optimizing your reward for that risk).
- rahimnathwani 4y agoEndowment effect.
- jacques_chester 4y agoOr simulation heuristic: https://en.wikipedia.org/wiki/Simulation_heuristic https://en.wikipedia.org/wiki/Simulation_heuristic
- rahimnathwani 4y agoYeah. I didn't know the name for this, but have seen it.
- ghaff 4y agoI was working for a major tech company—definitely not a startup during dot-comb. I had some amount of vested shares which seemed a lot at the time. I spent some but held onto a few tens of K$. Stock went down from over $100 at peak to about $4. By years later had recovered to about $25–and then Dell acquired for a premium.
- nyokodo 4y ago> it's been very good to me on three separate occasions. Were those occasions during the mass retirement of the boomer generation leading to accelerating liquidation of stock market positions while the replacement generations are inadequate in number to replace the retirees during the collapse of globalization likely causing drops in worker productivity? Or were they during the longest stock market bull run in history?
- shabbatt 4y agoWhen they were printing money endlessly and rates were low, your strategy is sound. However, the house of cards is now crumbling and there is no end in sight to rate rises. My hedge fund manager friend for a private family office is saying we will see double digit rates by end of 2023. If you believe this then you know what to do. If not, you should at least think what such macro conditions would do to liquidity.
- its_bbq 4y agoELI Financially Illiterate. What do high Fed interest rates mean in this case?
- Sebguer 4y agoPeople invest more in companies when interest rates are low, because shoving it into lower risk vehicles becomes less profitable / likely to beat inflation. As interest rates rise, the value of safer places to put your money, such as bonds, increases. This is the super simple version.
- JAlexoid 4y agoAlso money market returns are significantly higher.
- baq 4y agoit'd mean your savings account would beat the S&P500 (after it finds a bottom obviously; this year having cash in a 0% savings account has been amazing!).
- helge9210 4y agoStock price is calculated as a sum of future cash flows (dividends D, for example) discounted by time value of money (risk free rate r, for example): sum(P_n), where P_n = D / (1 + r) ^ n and n is a year. When rate r is up P automatically down.
- rchaud 4y ago
- boringg 4y agoIf you did this at any time in the last 10 years you were probably rewarded handsomely. However the macro environment has significantly changed and I don't think your past behavior would be predictive of future performance.
- mjr00 4y agoFor the tech sector it's really been more like the last 22 years. There hasn't been an extended downturn in US tech stock since the original dot-com bubble. The 2008 recession ended up being a 1-2 year blip. The COVID contraction was extremely brief. By comparison, if you invested in the NASDAQ in 1999/2000, you'd need to wait 12-14 years to break even. I don't have a crystal ball, of course, but to me things are looking a lot closer to 2000 than 2008.
- deleted 4y ago[deleted]
- zibby8 4y agoBut did the bubble already burst in tech? Valuations are very low right now. I don't think we're necessarily at the bottom yet, but I think the worst has already come to pass.
- kgwgk 4y ago> Valuations are very low right now. Very low compared to what?
- deleted 4y ago[deleted]
- pessimizer 4y agoIn the specific case of Shopify, stock value is 20% of what it was a year ago, and 80% of what it was a month ago. Isn't that what's relevant?
- jacques_chester 4y ago"Every time I've traded cash for winning lotto tickets it's worked out for me in spades in the long run."
- wikfwikf 4y agohttps://xkcd.com/1827/ https://xkcd.com/1827/
- neon_electro 4y agoMy data point is the opposite, the one time I accepted equity in the form of options, stayed 4 years to vest it all, and got lucky where the company was acquired, the payout before taxes was worth less than if I had simply negotiated an additional $10k before taxes on my salary. I’m not optimistic for future employers offering me equity actually worth more than cash over the 4 years it takes to vest.
- cortesoft 4y agoIt depends on what stage your company is, but the vast majority of start ups fail… so for most people at startups, cash is going to be much more reliable. I worked at two startups prior to my current job that both went out of business. I had a few opportunities to take more equity or cash, and I’m glad I took cash every time. I would have gotten zero if I took the equity.
- mugivarra69 4y agoi think tobi needs to talk to his shopifolks
- thoraway8474637 4y agoTobi doesn’t talk to anyone anymore - they literally cancelled the weekly all-hands so he didn’t have to speak to us.
- mugivarra69 4y agowow.
- deleted 4y ago[deleted]
- shabbatt 4y agoPersonally if I was a shopify employee and I was looking at all these layoffs coinciding with rate rises with more to come, I would think liquidity will quickly dry up and opt for cash. I am open to rebuttals but I'm hearing that we will be seeing double digit interest rates again like the 70s.
- Shindi 4y agoI guess it depends on your financial goals. I'm a younger big tech employee that has at times seen my income drop in half. However, I personally believe tech will have a massive rebound in the next 2-10 years and long term capital gains tax is really nice.
- mabbo 4y agoIn no way do I speak for my employer, but on a personal level, this has been amazing for me and I'm so grateful the company did this. I'm very conservative about investing, and don't want to have a large amount of my portfolio tied up in the company I work for. I'm maxed out on cash (there's a minimum equity portion at my level) and my additional income goes into a broader portfolio of investments.
- maerF0x0 4y agoIts a very efficient thing for them to do too if ultimately you're just going to sell all and then reinvest. Ideally they would have started this program at a high stock price, but now better than never.
- MEMORYC_RRUPTED 4y agoSame here. It's also nice that I happen to live in a country that gives a tax break on your (monetary, not stock) income, so that makes the choice for money even easier. Reinvest it in an index fund, and forget about it. Yeah, I might miss out on significant gains, but I might also not. Less risk for a reasonable yield.
- duxup 4y ago>don't want to have a large amount of my portfolio tied up in the company I work for. Just before the .com bust a company I worked for decided to remove the option for employees to just dump their 401k contributions into company stock, and removed the option to direct a massive % of their paycheck into the company stock purchase plan. (I believe some of these limits became law later on but at the time it was legal) Some folks got really upset by that. The argument at that time was "we don't to be a part of employees suddenly being broke if things go south". About a year later they were right, things went south. Our stock did sorta well in the long term (not great short term of course), but IMO it was a good choice.
- mabbo 4y agoThis is a large part of why I feel this way. I grew up near Ottawa, and had a lot of friends whose parents worked at Nortel. They were compensated with a lot of stock, which they held onto (it keeps rising, after all). Their pension plan was mostly invested in the company stock too. When the company fell apart (let's set aside whose fault that is- different topic), they lost their jobs, their savings, their pensions, in their 40s and early 50s mostly.
- tensor 4y agoOne crucial thing not often talked about with this plan is that the stock is granted and vests quarterly. In fact, the amount of stock you get each quarter is also variable. E.g. if you choose to have 100k of equity each year, each quarter you get whatever amount of units equates to 25k of stock. So what they've done is nearly completely untie compensation from the stock price. You neither benefit significantly nor lose significantly as the stock moves around. I've never in my life seen an equity plan like it, and that's not a comment on whether it's good or bad, just that it's unusual.
- LudwigNagasena 4y agoWhat is even the point? Some of sort tax benefits?
- londons_explore 4y agoSo how is it different than just paying the employee cash and recommending that they buy shopify stock? Is it just a user friction thing?
- WaxProlix 4y agoIt's easier to make stock out of thin air (well, sort of) than cash, and accounting wise it's much more pleasant for companies to do so.
- Vvector 4y agoStock Grants are not an "expense" under Generally Accepted Accounting Principles. So by paying in stock, instead of salary, it increases profits on paper. It does help with cash flow and other tangible benefits. Most employees would be wise to divest much of their company stock as soon as they are allowed. Don't have all your eggs in one basket.
- jayp 4y agoIs this really true?
- xal 4y agoAdded some additional information here: https://twitter.com/tobi/status/1570791158691012610 https://twitter.com/tobi/status/1570791158691012610 It's a really great system. We recommend that people borrow from it liberally.
- knrz 4y agoWhen people ask about what it’s like doing tokenomics for crypto projects, well, it’s an exercise in applied systems design. Bravo on this system man! Any plans on open sourcing some of the stuff, like the math?
- deleted 4y ago[deleted]
- debacle 4y agoYahoo Finance for Shopify https://finance.yahoo.com/quote/SHOP?p=SHOP&.tsrc=fin-srch https://finance.yahoo.com/quote/SHOP?p=SHOP&.tsrc=fin-srch Yikes.
- pc86 4y ago-5.4% today -8% 5-day -19.25% 1-month -76% YTD -79% 12-month
- amrocha 4y agohttps://twitter.com/tobi/status/1570791158691012610 https://twitter.com/tobi/status/1570791158691012610 It's funny seeing the example they give has total comp at 200K considering that a year ago they were still paying less than 100K USD (sightly over 100K CAD) for senior staff
- danbrooks 4y agoI interviewed with Shopify earlier this year and they were offering ~200k for "Senior" tech positions.
- amrocha 4y agoGlad to hear it! I remember reading news that they increased pay across the board. Probably to deal with the exodus of fully vested senior staff that happened during covid.
- Bombthecat 4y agoI would short this stock waiting for its implosion... So Many Sites are using shoppify when they basically sell no or one product per year...
- boringg 4y agohttps://www.fool.ca/2020/01/11/shopifys-shop-stock-price-soars-as-short-seller-throws-in-the-towel/ https://www.fool.ca/2020/01/11/shopifys-shop-stock-price-soa...
- cyral 4y agoConsidering it went from $1,600 or so to $300 (adjusted for split, as it is really $30), you may be a bit late for that
- alex_young 4y agoIt still has a $40B market cap
- Bombthecat 4y agoTesla too..
- trynewideas 4y agoMy experience is probably not relevant to the audience here, but having worked at startups largely in non-engineering support roles that got smaller or heavily diluted grants, I've lost about $3,000 on options in 10 years in tech. I paid in $17,500 at two places where I had vested any options, all ISOs, and cashed out ~$14,500: broke even on an IPO at $7,500 vested, and lost $3k of $10k after the company was sold for less per share than the strike price of my options. If I had stayed at the IPO'd company longer I could've gotten a higher-class of option, but my salary there was $15k/year less than the bootstrapped no-equity company I left them for, and the returns over two years of vesting would've still been less than one year of difference in salary. At most of the places I worked, I either didn't make enough money or experienced too much external financial distress to actually buy all of the options I vested. Which is good, because none of them appreciated and most depreciated in value by 20%. If I had exercised all of my vested options I would've lost up to another $5-7k - at best I would have lost another $2-3k. The only RSUs I was ever offered vested 2 weeks after I left a job that I'd had for almost six years, for a role elsewhere paying $25k/year more. The RSUs were a surprise bonus worth less than $5,000 and tacked onto everyone at the company, including roles that had already gotten larger RSU grants. If I had stayed two weeks longer and vested them, then when the company sold they would've been worth less than $4,000. Between the salary difference, a much smaller insurance deductible at the new job, and a 4x larger 401k match, I had effectively made up the difference by my fourth paycheck (eight weeks) just on salary. On my experience I'd take the cash every single time. Reading the replies here, it seems like engineers, managers, and early hires live in a completely different reality regarding equity.
- htrp 4y agoI think the answer is that for everybody who brags about the equity package there are 9 other people who don't talk about the underwater options or the losses they ended up taking
- trynewideas 4y agoWorking at a company for almost six years, with equity as a significant part of the compensation, and losing 20% of what I exercised - in my fourth startup with an equity component, none of them doing better than break-even - means I just do not care about equity when offered it anymore. If I'm offered, say, $150k + ISOs now, my brain just chucks it out the other end as $150k + $0. And I got to that place even before the market started to fall over. I remember a recruiter in the offer stage of one job describing the ISOs - "if we go 2x, your options will be worth $XX,XXX. If we go 10x, they'll be worth $X,XXX,XXX" - and I had to cut her off as gently as I could so we could get to the health insurance that I would probably be maxing out the deductible on instead. (That job didn't last long enough to vest any of the options; laid off after a leadership change/re-org.)
- fiat_fandango 4y agoI think the better move for most of these folks is to wring as much cash as they can out of their current gig at Shopify and trade up to a new gig with a fresh stock grant at basically any other company. Joining G / Meta right now gives you incredible leverage if things bottom out any time soon.
- jchonphoenix 4y agoPalantir has done this system for well over a decade