6 ms·

I wonder how stock options play into this. Assuming you have generous stock options in a thriving company, wouldn’t it be worth it to stick out 3-4 years for a

by tnel77 2y ago

I wonder how stock options play into this. Assuming you have generous stock options in a thriving company, wouldn’t it be worth it to stick out 3-4 years for a majority of that equity?

fishpen0 2y ago
Gambling vs Guarantee. I've lost options or unvested RSU 3 times to companies suddenly rolling over, getting acquired, or doing layoffs. Of the two times I've hit it and actually had them pay out, one payed out at only 1/3 of the original valuation of the equity and one only paid out for two quarters before we were acquired. Take the pay increase vs the equity every time. Plus by changing 5 times, I diversified my equity on more companies and ensured something hit at least a little.
- sashank_1509 2y ago
  RSU’s most of the time are not gambling. You’re talking about gambling in startups (or small companies ) that can get acquired, run out of funds etc. Tech layoffs, people don’t realize that after the dot com crash this might be the first time layoffs happened at big tech companies (even then Apple and NVIDIA didn’t layoff). Not taking RSU’s in these tech companies is a very bad idea financially, I like to think of it as equivalent cash. You can always sell your RSU immediately to get cash. But another advantage is when you individually invest in stocks, you rarely have a large fund into 1 stock, you probably diversify into index funds. This gives you consistent returns but leaves no shot at making a fortune. In my experience RSU’s as by default are fully invested into the 1 company you’re working for, give you that outsized return opportunity. Just ask employees at snowflake, NVIDIA, Tesla. Heck even MSFT RSU’s have doubled in value every couple of years and Amazon had insane growth from 2010 to 2022, where if you had gotten equivalent in cash you would be more than 10 times poorer than someone who just held Amazon RSU’s. Yes putting large amounts in 1 stock is risky, but not nearly as risky as you make it sound to be.
  - fishpen0 2y ago
    > You can always sell your RSU immediately to get cash. This is not true at all. My current company is privately held and has RSUs. Over the last two years there has been a single buyback and it was at a fixed closed market price and we were limited to selling 10% of our vested RSUs. Lots of startups flipped to RSUs with no plan to go public or be bought out in the last few years. Additionally, even if your company is stable RSUs are frought with issues like what happened two orgs ago where a blackout period started and our stock went into a 30% free fall during the blackout and never recovered. We ended up getting a tender offer, the company sold to private equity and unvested shares were clawed back
    - sashank_1509 2y ago
      Private company RSU’s are a different ballgame entirely. They are essentially paper money and I would classify them under startups. Yeah I’d agree for a more risky venture, cash is better (unless you are in a gambling mood), I’d disagree that being true for FAANG or any of the 100 billion + tech companies (Airbnb, Uber, snowflake, Palo Alto networks etc)
paholg 2y ago
With options, there's always a risk that they will be worth nothing, or very little. I would rather have some options in several companies than a lot of options in one to increase the chance that some of them will be valuable. That approach does require you to buy the options, whereas staying at one company means you can delay the purchase
- irrational 2y ago
  Seriously. My brother received $1 million in Tesla stock options when they recruited him. They certainly aren’t worth that much anymore. Does he stay and hope the Musk will stop tanking the stock or jump ship?
  - seattle_spring 2y ago
    Tesla is giving options instead of RSUs still? Usually big public companies grant RSUs except to the top-most senior leadership team.
    - sashank_1509 2y ago
      Known from a friend, he could choose RSU’s, options or cash from Tesla. (You would get more options than RSU’s to compensate for risk). Also Tesla stock price 10xed in the year 2020, even after all the hits , it’s still like 6x from pre 2020. Your brother had to join after 2020, which is unlucky I guess.
- philsnow 2y ago
  Strategy 1: Stay for four years and vest your entire initial grant. Strategy 2: Stay 1-2 years and vest 25%-50% of your initial grant, and repeat 3x-1x. If all the companies you work for have similar likelihood of doing exceptionally well, you've paid 4 years and gotten either one lottery ticket worth X (strategy 1) or 2-4 lottery tickets each worth 50%-25% of X. When you don't already have "enough" money, 25% of X is still life-changing, and if you can get 2-4 shots at it instead of 1, that can be a very workable strategy.
dentemple 2y ago
The number of people who meet the conditions of having "generous" stock options (that aren't just pretend money) in a company thriving enough for them to overcome a -50% salary deficient are probably a very, very small minority.
bluGill 2y ago
Most companies don't offer options. If you work for the rare one that does (generally a startup) it might be - but you better watch the books: most of them are not worth much if anything. Never put your savings into the stock of the company you work for. If (as happens) the company goes bankrupt you can be out of a job and all your savings at the same time. The only exception is if you have reason to believe you will be CXX - at that level (or one below in some cases) your stock owners is published to shareholders and they look for high levels to show you have your personal wealth on the line for the company - and you also have enough power to do something about it. (most of us don't have enough power for anyone to care what we think). Stock options are the same as any other stock: don't put your net worth into it. I have long ago learned that until the money is in my bank account it isn't mine. Sometimes the promised $$$ arrives, sometimes it does not. But always I want to see the money.

by tnel77 2y ago

I wonder how stock options play into this. Assuming you have generous stock options in a thriving company, wouldn’t it be worth it to stick out 3-4 years for a majority of that equity?

fishpen0 2y ago

Gambling vs Guarantee. I've lost options or unvested RSU 3 times to companies suddenly rolling over, getting acquired, or doing layoffs. Of the two times I've hit it and actually had them pay out, one payed out at only 1/3 of the original valuation of the equity and one only paid out for two quarters before we were acquired. Take the pay increase vs the equity every time. Plus by changing 5 times, I diversified my equity on more companies and ensured something hit at least a little.

sashank_1509 2y ago
RSU’s most of the time are not gambling. You’re talking about gambling in startups (or small companies ) that can get acquired, run out of funds etc. Tech layoffs, people don’t realize that after the dot com crash this might be the first time layoffs happened at big tech companies (even then Apple and NVIDIA didn’t layoff). Not taking RSU’s in these tech companies is a very bad idea financially, I like to think of it as equivalent cash. You can always sell your RSU immediately to get cash. But another advantage is when you individually invest in stocks, you rarely have a large fund into 1 stock, you probably diversify into index funds. This gives you consistent returns but leaves no shot at making a fortune. In my experience RSU’s as by default are fully invested into the 1 company you’re working for, give you that outsized return opportunity. Just ask employees at snowflake, NVIDIA, Tesla. Heck even MSFT RSU’s have doubled in value every couple of years and Amazon had insane growth from 2010 to 2022, where if you had gotten equivalent in cash you would be more than 10 times poorer than someone who just held Amazon RSU’s. Yes putting large amounts in 1 stock is risky, but not nearly as risky as you make it sound to be.
- fishpen0 2y ago
  > You can always sell your RSU immediately to get cash. This is not true at all. My current company is privately held and has RSUs. Over the last two years there has been a single buyback and it was at a fixed closed market price and we were limited to selling 10% of our vested RSUs. Lots of startups flipped to RSUs with no plan to go public or be bought out in the last few years. Additionally, even if your company is stable RSUs are frought with issues like what happened two orgs ago where a blackout period started and our stock went into a 30% free fall during the blackout and never recovered. We ended up getting a tender offer, the company sold to private equity and unvested shares were clawed back
  - sashank_1509 2y ago
    Private company RSU’s are a different ballgame entirely. They are essentially paper money and I would classify them under startups. Yeah I’d agree for a more risky venture, cash is better (unless you are in a gambling mood), I’d disagree that being true for FAANG or any of the 100 billion + tech companies (Airbnb, Uber, snowflake, Palo Alto networks etc)

paholg 2y ago

With options, there's always a risk that they will be worth nothing, or very little. I would rather have some options in several companies than a lot of options in one to increase the chance that some of them will be valuable. That approach does require you to buy the options, whereas staying at one company means you can delay the purchase

irrational 2y ago
Seriously. My brother received $1 million in Tesla stock options when they recruited him. They certainly aren’t worth that much anymore. Does he stay and hope the Musk will stop tanking the stock or jump ship?
- seattle_spring 2y ago
  Tesla is giving options instead of RSUs still? Usually big public companies grant RSUs except to the top-most senior leadership team.
  - sashank_1509 2y ago
    Known from a friend, he could choose RSU’s, options or cash from Tesla. (You would get more options than RSU’s to compensate for risk). Also Tesla stock price 10xed in the year 2020, even after all the hits , it’s still like 6x from pre 2020. Your brother had to join after 2020, which is unlucky I guess.
philsnow 2y ago
Strategy 1: Stay for four years and vest your entire initial grant. Strategy 2: Stay 1-2 years and vest 25%-50% of your initial grant, and repeat 3x-1x. If all the companies you work for have similar likelihood of doing exceptionally well, you've paid 4 years and gotten either one lottery ticket worth X (strategy 1) or 2-4 lottery tickets each worth 50%-25% of X. When you don't already have "enough" money, 25% of X is still life-changing, and if you can get 2-4 shots at it instead of 1, that can be a very workable strategy.

dentemple 2y ago

The number of people who meet the conditions of having "generous" stock options (that aren't just pretend money) in a company thriving enough for them to overcome a -50% salary deficient are probably a very, very small minority.

bluGill 2y ago

Most companies don't offer options. If you work for the rare one that does (generally a startup) it might be - but you better watch the books: most of them are not worth much if anything. Never put your savings into the stock of the company you work for. If (as happens) the company goes bankrupt you can be out of a job and all your savings at the same time. The only exception is if you have reason to believe you will be CXX - at that level (or one below in some cases) your stock owners is published to shareholders and they look for high levels to show you have your personal wealth on the line for the company - and you also have enough power to do something about it. (most of us don't have enough power for anyone to care what we think). Stock options are the same as any other stock: don't put your net worth into it. I have long ago learned that until the money is in my bank account it isn't mine. Sometimes the promised $$$ arrives, sometimes it does not. But always I want to see the money.