6 ms·

Most FAANG comp is RSU, not options.

adam_arthur 4y ago
The distinction is not meaningful in this context. Both are deferred compensation that's subject to gaining/losing value along with the underlying company valuation
- rippercushions 4y ago
  No, options are more of a gamble. Stock values move up and down, but an RSU worth something today will likely be worth something tomorrow: even much-pilloried Meta stock is down "only" 50% from peak at this point. An underwater option, though, is completely worthless.
  - adam_arthur 4y ago
    You could easily grant employees "in the money" options that have a lower risk profile, and similar characteristics as RSU. This is effectively what an RSU is anyway, an option with a strike price of 0 that vests+exercises at some point in the future. Not to mention most startup options are granted at 409A valuation, which in most cases is below actual market value. No meaningful difference between the two for the context being discussed above. Different tax treatment. Believe whatever you want though
    - singron 4y ago
      It's difficult to grant privately held equity that's taxable when it vests since you can't sell it to cover the taxes. Also if the company doesn't go anywhere, you paid a lot of taxes for nothing, and it can be difficult to even claim a loss if the company still limps along.
    - hamster77 4y ago
      You cannot legally grant stock options in the US with an exercise price below the 409A price (private company) or grant date price (public company)
- anonuser123456 4y ago
  The distinction is super meaningful in this context. - RSU compensation is used to prevent wage stickiness. It lets a firm pay really high wages when times are good and claw back that comp when times are bad. - Stock options are a way to bait the gullible into working for low wages. Options cost non-hypergrowth companies nothing. As such, it doesn’t stop them from getting over the tips of their skis via labor costs. There is nothing to claw back / reduce. So when the economy hits a snag, RSU heavy companies have a built in cost moderator whereas options based companies have to layoff.
  - adam_arthur 4y ago
    RSUs cost the issuing company nothing from a cash perspective too. They simply create the stock out of thin air, diluting existing shareholders, e.g. stock based compensation expense. While no affect on cash on hand, it does negatively impact GAAP earnings.
  - hamster77 4y ago
    Grating RSUs results in fixed accounting for companies - stock-based comp expense doesn’t fluctuate with stock price unless there are features that result in variable accounting instead (which most companies avoid)

The distinction is not meaningful in this context. Both are deferred compensation that's subject to gaining/losing value along with the underlying company valuation

rippercushions 4y ago
No, options are more of a gamble. Stock values move up and down, but an RSU worth something today will likely be worth something tomorrow: even much-pilloried Meta stock is down "only" 50% from peak at this point. An underwater option, though, is completely worthless.
- adam_arthur 4y ago
  You could easily grant employees "in the money" options that have a lower risk profile, and similar characteristics as RSU. This is effectively what an RSU is anyway, an option with a strike price of 0 that vests+exercises at some point in the future. Not to mention most startup options are granted at 409A valuation, which in most cases is below actual market value. No meaningful difference between the two for the context being discussed above. Different tax treatment. Believe whatever you want though
  - singron 4y ago
    It's difficult to grant privately held equity that's taxable when it vests since you can't sell it to cover the taxes. Also if the company doesn't go anywhere, you paid a lot of taxes for nothing, and it can be difficult to even claim a loss if the company still limps along.
  - hamster77 4y ago
    You cannot legally grant stock options in the US with an exercise price below the 409A price (private company) or grant date price (public company)
anonuser123456 4y ago
The distinction is super meaningful in this context. - RSU compensation is used to prevent wage stickiness. It lets a firm pay really high wages when times are good and claw back that comp when times are bad. - Stock options are a way to bait the gullible into working for low wages. Options cost non-hypergrowth companies nothing. As such, it doesn’t stop them from getting over the tips of their skis via labor costs. There is nothing to claw back / reduce. So when the economy hits a snag, RSU heavy companies have a built in cost moderator whereas options based companies have to layoff.
- adam_arthur 4y ago
  RSUs cost the issuing company nothing from a cash perspective too. They simply create the stock out of thin air, diluting existing shareholders, e.g. stock based compensation expense. While no affect on cash on hand, it does negatively impact GAAP earnings.
- hamster77 4y ago
  Grating RSUs results in fixed accounting for companies - stock-based comp expense doesn’t fluctuate with stock price unless there are features that result in variable accounting instead (which most companies avoid)