4 ms·
You can get loans backed by the shares themselves. Ie, the lender gets x% of the shares, rather than being paid back a specific dollar amount at a later time.
by akavi 4y ago
You can get loans backed by the shares themselves. Ie, the lender gets x% of the shares, rather than being paid back a specific dollar amount at a later time.
- runako 4y agoIn this market, the X% might well need to be so near to 100% as to make the transaction not worth doing. For ex: Stripe has marked itself down ~50% over the last year. Suppose you think the haircut should be more like the 70% comps like SQ and PYPL have taken, and build that into the X%. Then on top of that loss buffer, you prudently demand an illiquidity premium and a profit margin. That arithmetic doesn't leave much room for the employee to retain any stock.
- zamnos 4y agoMore explicitly, if the shares go to zero, you don't owe any money
- nrmitchi 4y agoIf the shares to go 0, and the loan is discharged, the discharged amount is still considered taxable income (at least if you are subject to US taxation)
- choppaface 4y agoRight, that's what banks were doing for Uber employees, for AFAIK, as low as 7-digit packages. I believe the interest was conditional on an IPO happening tho, and in some cases the IPO not only got delayed but the IPO price was actually a little below secondary market price right before the IPO (same as Facebook). I would think banks would do this again? But perhaps with a longer IPO window? Like the banks that would do this would also likely participate in the IPO anyways ...