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Yes, to me this basically sounds like ESPP without the discount

kodah 4y ago
This is how my ESPP works. I couldn't imagine that program replacing my RSUs. What a ripoff to the people attracted by the promise of RSUs. As someone who came into tech with $0 in savings, RSUs are what gave me financial freedom. When a business dilutes that they not only dilute the marginal amount of business that employees get back in return for their contributions but it also takes away another key financial utility for people to rise economically.
- MikeTheRocker 4y ago
  I don't understand how it could be preferable to be paid in public equity you could otherwise buy with cash
  - pxx 4y ago
    You get a small free option if job change costs are zero. Unvested equity can appreciate. The option is only really free if you can change jobs effortlessly if it depreciates, but that's close enough to true if you're motivated enough. Note that this is still catastrophic in terms of diversification. And you can compare job change costs directly to how much paying for this option would cost.
  - zachur 4y ago
    It can be preferable because RSU's typically have a basis that reflects the price of the stock at the time they're granted. So if you're granted $100k in RSU's per year at year 0, and the price of the stock doubles by year 1, you'll actually receive $200k worth of stock.
    - ulfw 4y ago
      And when it halves (like it happened to most tech stock over the last year) you get $50K by year 1. If that doubles you finally get your 100K again by year 2.
      - hamburglar 4y ago
        And yet if you look at most tech stocks that "halved" this year (which, btw, is an overstatement for most), they're still up from 2 years ago. My company's stock is down 25% but my RSUs that vested this year were still worth a hell of a lot more than when they were granted 2,3, or 4 years ago.
      - medvezhenok 4y ago
        I think the point is that RSUs are preferable if the stock goes up, and cash is preferable if the stock goes down. If the stock stays flat, there is no difference between RSU/cash split. I think most people's assumption that the market will go up over time so most people would prefer RSUs. How accurate that assumption is in the short-medium term remains to be seen.
        shard 4y ago
        To be more general, RSUs are preferable if the stock goes up higher relative to other investments that the grantee could have picked, and cash is preferable if the stock performs worse than other investments that the grantee could have picked. For example, if the stock rises but performs worse than an index fund, then the grantee would have been better served to have gotten cash and put it into a no-effort index fund. If the grantee has an aptitude for stock picking, the balance sways even more towards cash being preferable.
        Thrymr 4y ago
        Not true, because the cash would be distributed over time (as increased salary or bonus) as well, not a lump sum up front available for investment.
        shard 4y ago
        Still true if the investment made with the cash distributed over time performs better than the RSUs granted lump sum up front.
  - hamburglar 4y ago
    It's a matter of the difference between when they are granted versus when you receive them. If I tell you I'm going to give you $100k cash in 4 years, that's wildly different from if I tell you that in 4 years I'm going to give you stock purchased at today's price for $100k. Yes, the upside relies on the stock going up, but that upside can change things quite a bit.
    - MikeTheRocker 4y ago
      This makes sense, thank you
- spaceywilly 4y ago
  If your company had offered you the cash value of RSUs instead of the RSUs, would you not have ended up in the same position financially? For example, if your base pay was 200k, and you had a grant of RSUs worth 200k, how is that better financially than getting all 400k in cash?
  - modeless 4y ago
    If you have RSUs worth 200k per year, standard practice is that you get one grant of 800k at the start of employment, vesting over four years. If you got 200k cash instead, you couldn't buy 800k stock in the first year. That's an extra 600k of upside exposure. If that 600k of extra stock appreciates a lot in the first few years, you are far better off with the RSU grant. If it doesn't, you can quit before it vests and try again at a different company, you're not locked in.
    - ulfw 4y ago
      I don't know a single tech stock that has (significantly) appreciated over the last 12 months. I know a ton that depreciated by 2/3rds.
      - sokoloff 4y ago
        Which leaves the employee with less upside going forward, at which point they can switch companies and "start over" with an RSU grant that is at par. In this regard the initial grant has a bit of flavor of an option. You have the option to stay on the vesting schedule or change companies and start a new vesting schedule, but any losses on unvested amounts don't hit you if you switch.
        paulmd 4y ago
        incentivizing productive employees (the ones with the most alternatives) to quit if the stock price (or the stock market generally) goes down is a hell of a side-effect when you put it like that. I guess that's the monkey-paw side of "incentivizing the employees to make the company perform by giving them a stake in the upside"...

This is how my ESPP works. I couldn't imagine that program replacing my RSUs. What a ripoff to the people attracted by the promise of RSUs. As someone who came into tech with $0 in savings, RSUs are what gave me financial freedom. When a business dilutes that they not only dilute the marginal amount of business that employees get back in return for their contributions but it also takes away another key financial utility for people to rise economically.

MikeTheRocker 4y ago
I don't understand how it could be preferable to be paid in public equity you could otherwise buy with cash
- pxx 4y ago
  You get a small free option if job change costs are zero. Unvested equity can appreciate. The option is only really free if you can change jobs effortlessly if it depreciates, but that's close enough to true if you're motivated enough. Note that this is still catastrophic in terms of diversification. And you can compare job change costs directly to how much paying for this option would cost.
- zachur 4y ago
  It can be preferable because RSU's typically have a basis that reflects the price of the stock at the time they're granted. So if you're granted $100k in RSU's per year at year 0, and the price of the stock doubles by year 1, you'll actually receive $200k worth of stock.
  - ulfw 4y ago
    And when it halves (like it happened to most tech stock over the last year) you get $50K by year 1. If that doubles you finally get your 100K again by year 2.
    - hamburglar 4y ago
      And yet if you look at most tech stocks that "halved" this year (which, btw, is an overstatement for most), they're still up from 2 years ago. My company's stock is down 25% but my RSUs that vested this year were still worth a hell of a lot more than when they were granted 2,3, or 4 years ago.
    - medvezhenok 4y ago
      I think the point is that RSUs are preferable if the stock goes up, and cash is preferable if the stock goes down. If the stock stays flat, there is no difference between RSU/cash split. I think most people's assumption that the market will go up over time so most people would prefer RSUs. How accurate that assumption is in the short-medium term remains to be seen.
      - shard 4y ago
        To be more general, RSUs are preferable if the stock goes up higher relative to other investments that the grantee could have picked, and cash is preferable if the stock performs worse than other investments that the grantee could have picked. For example, if the stock rises but performs worse than an index fund, then the grantee would have been better served to have gotten cash and put it into a no-effort index fund. If the grantee has an aptitude for stock picking, the balance sways even more towards cash being preferable.
        Thrymr 4y ago
        Not true, because the cash would be distributed over time (as increased salary or bonus) as well, not a lump sum up front available for investment.
        shard 4y ago
        Still true if the investment made with the cash distributed over time performs better than the RSUs granted lump sum up front.
- hamburglar 4y ago
  It's a matter of the difference between when they are granted versus when you receive them. If I tell you I'm going to give you $100k cash in 4 years, that's wildly different from if I tell you that in 4 years I'm going to give you stock purchased at today's price for $100k. Yes, the upside relies on the stock going up, but that upside can change things quite a bit.
  - MikeTheRocker 4y ago
    This makes sense, thank you
spaceywilly 4y ago
If your company had offered you the cash value of RSUs instead of the RSUs, would you not have ended up in the same position financially? For example, if your base pay was 200k, and you had a grant of RSUs worth 200k, how is that better financially than getting all 400k in cash?
- modeless 4y ago
  If you have RSUs worth 200k per year, standard practice is that you get one grant of 800k at the start of employment, vesting over four years. If you got 200k cash instead, you couldn't buy 800k stock in the first year. That's an extra 600k of upside exposure. If that 600k of extra stock appreciates a lot in the first few years, you are far better off with the RSU grant. If it doesn't, you can quit before it vests and try again at a different company, you're not locked in.
  - ulfw 4y ago
    I don't know a single tech stock that has (significantly) appreciated over the last 12 months. I know a ton that depreciated by 2/3rds.
    - sokoloff 4y ago
      Which leaves the employee with less upside going forward, at which point they can switch companies and "start over" with an RSU grant that is at par. In this regard the initial grant has a bit of flavor of an option. You have the option to stay on the vesting schedule or change companies and start a new vesting schedule, but any losses on unvested amounts don't hit you if you switch.
      - paulmd 4y ago
        incentivizing productive employees (the ones with the most alternatives) to quit if the stock price (or the stock market generally) goes down is a hell of a side-effect when you put it like that. I guess that's the monkey-paw side of "incentivizing the employees to make the company perform by giving them a stake in the upside"...