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Ask HN: Are RSUs worth your loyalty?

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Re: Ask HN: Are RSUs worth your loyalty?

#61

Post by klipt »

matmann2001 wrote: post #60
alex_young wrote: post #59

Earlier quoted context omitted.

> 3) You can sell your RSUs once they vest in order to diversify, but you have to wait a year after vesting or short term gains tax will apply. This is incorrect. RSUs, once vested, are taxed as income, and any gains or losses from the day they vest are treated as any other stock would be from that day on. There is no tax benefit in holding on to them rather than selling and diversifying. This detail makes RSUs equiv…

I meant that short term gains tax applies post-vesting. I'll try to make that clearer. Of course, you're right in that selling immediately incurs no additional tax, as you'd be paying short term gains tax on essentially $0.

Right, but if you sell immediately on vesting those gains will be ~0, so there's no major tax downside to selling immediately and e.g. buying an index fund instead to diversify.

Re: Ask HN: Are RSUs worth your loyalty?

#62

Post by dominotw »

nugget wrote: post #39
dominotw wrote: post #14

Earlier quoted context omitted.

> have another million in RSUs vesting I would gladly wear these handcuffs :D

What are you willing to sacrifice to vest those RSUs, besides just time? Your mental health? Your physical health? Watching your kids grow up? Your marriage? Etc. As other folks have alluded to it can sound relatively trivial (and sometimes it is, but often not) until you're actually staring into the abyss. The flip side is that quarterly RSU vesting is highly effective as a retention tool. I've known brilliant peopl…

I already sacrifice those :D

Re: Ask HN: Are RSUs worth your loyalty?

#63

Post by myvoiceismypass »

SubuSS wrote: post #53
apexkid wrote: post #43

I disagree with anyone saying that RSU's are ideal way to get employees invested in a company's success. In practice, total compensation for an employee is decided by market value of that employee. If RSUs shoot up, you will get lesser base pay, if they go down you will end up getting higher base pay in next appraisal cycle. Your salary might be inflated or underflated (for lack of a better word) for a while but in l…

The problem being I can't think of a single company that offers an all cash deal even close to the FAANG offers (or pre-ipo offers in one of the unicorns). Even a bunch of giant companies like HBO/Samsung etc. got priced out for the same reason at least in a few cases I know.

Netflix offers all cash comp (plus options, not the same)

Re: Ask HN: Are RSUs worth your loyalty?

#64

Post by notJim »

paxys wrote: post #25
frank2 wrote: post #17

Earlier quoted context omitted.

I disagree that RSUs can be worth significantly more than cash because the recipient of the cash can use the cash to buy (unrestricted) stock units if he or she is optimistic about the stock.

They can definitely be worth significantly more since RSU numbers are locked well in advance (1-4 years).

This is the key. When I was interviewing, I had an offer of $150k + $20k stock, and another that was just straight $190k (these are fake numbers, but pretty close.) I told the first company about the $190k offer, and they matched it by upping the stock to $35k, and I took that offer. Then the stock nearly-doubled in value over the first year.

Now it's worth mentioning that the stock could have also gone down, and frankly I am extremely skeptical of my own ability to predict this. So I wouldn't say I selected this offer based on the potential upside of the stock. But still, it's a nice upside.

Re: Ask HN: Are RSUs worth your loyalty?

#65

Post by calypso »

lnanek2 wrote: post #10

Aren't RSUs the opposite of job security? If you get fired or leave before they vest, you lose them. In the bay area they are often called golden handcuffs because developers halfway through their 4 year term often have another million in RSUs vesting, so can't go leave and work on their friend's awesome startups and the like, since the startups can't afford to match the compensation.

Would this only be a problem if they vest in non-uniform quantities? At the company (Shopify) I work for they vest in even amounts over 4 years but you have to wait 1 year to get 1/4 of them then every quarter after that.

Re: Ask HN: Are RSUs worth your loyalty?

#66

Post by mrbonner »

lnanek2 wrote: post #10

Aren't RSUs the opposite of job security? If you get fired or leave before they vest, you lose them. In the bay area they are often called golden handcuffs because developers halfway through their 4 year term often have another million in RSUs vesting, so can't go leave and work on their friend's awesome startups and the like, since the startups can't afford to match the compensation.

The first few years (2 or 3 in my case), is tough. You don’t get any more RSU hence you need to stick with it. After that period, I got awarded more every performance review. So, the vested schedule is bearable but I still feel it is a golden handcuff. If I quit I would lose any unvested shares (1-2 years from now).

Re: Ask HN: Are RSUs worth your loyalty?

#67

Post by mrbonner »

matmann2001 wrote: post #56

RSUs are a decent way of aligning company success with employee success. But there's plenty of pitfalls with RSUs too. 1) From an investment risk perspective, your personal livelihood is already significantly tied to the company because you rely on the company for a salary. Holding a significant chunk (relative to your total investments) of stock in your company as well adds to that risk. 2) Unless you're a C-suite e…

#3 is incorrect. If you choose to “sell all” when vested instead of “sell to cover” then the RSU award will be just ordinary income. If you sell to cover and then sell the remaining vested RSU within a year (sans insider trading rule) any profit will be taxed as short-term gain.

Re: Ask HN: Are RSUs worth your loyalty?

#68

Post by tmarman »

frank2 wrote: post #17
zaptheimpaler wrote: post #13

RSUs are worth more than cash if you're optimistic about the stock and worth less if you're pessimistic. Over the last 10 years they've probably been worth a lot more than cash if you held on instead of selling, but no one knows about the next 10.

I disagree that RSUs can be worth significantly more than cash because the recipient of the cash can use the cash to buy (unrestricted) stock units if he or she is optimistic about the stock.

RSUs are more akin to salary (i.e., your RSU grant / vesting period = annual salary increase) than a bonus where you get the cash upfront. So yeah, if the choice was $100k signing bonus or $100k RSU, the analysis is different - but that's not how they work.

One of the key benefits of RSUs is that they are priced and granted upfront and can appreciate (and earn dividends) before they vest.

A more concrete example: let's imagine you joined AAPL Jan 1, 2019 and were granted $100k in RSUs. You'd get 667 shares, and vest 83 shares every six months. If the stock doesn't move at all, that's the same as the additional salary (though salary is better since it's prorated evenly as opposed to bi-annual "bonuses").

Of course, the stock prices don't stay the same... and that's where the potential comes in. In the last year, AAPL has doubled. In that example, you would have vested 83 shares at $200 ($16,675) in the summer and 83 shares last week at $300 ($25k) vs. $25k salary in the first year.

In the same period, FB and GOOG have gone up 50%, AMZN has gone up 15%, NFLX (which doesn't do RSUs to my knowledge, only stock options) went up 6%. In all of those cases, you'd be better off in Y1 with the RSU grant.

Obviously, yes, there's downside risk to that too. The floor is still much higher tha stock options which can easily be worth nothing if underwater... but when you factor in that this is 20-50% of your total compensation, that upside/risk seems worth it.

Re: Ask HN: Are RSUs worth your loyalty?

#69

Post by nik_0_0 »

throw2773sgge wrote: post #52
bduerst wrote: post #38

RSUs are golden handcuffs. You'll continually get a raise each year and a portion of that will be new RSUs that vest over the next four years. If you ever want to leave, that continually means leaving a substantial amount of money on the table. Thankfully some companies will give you a hiring bonus equal to your unvested RSUs though (edit: the big tech companies poaching from each other will sometimes do it, for thos…

> Thankfully some companies will give you a hiring bonus equal to your unvested RSUs though Do you have any company names? Also, any numbers from your experience? I’d be quite happy to join pretty much anything for a 600K+ signing bonus.

I’ve heard of companies matching the RSU 1:1, same value, same schedule. Not a sign on bonus though.

Re: Ask HN: Are RSUs worth your loyalty?

#70

Post by makecheck »

I treat them as being worth $0, as an unexpected bonus. In other words, determine what you can “afford” (rent, etc.) based on NOT seeing a penny from an RSU.

There is no way to be exactly sure what they will be worth. Stock prices not only go up and down but the “long term” (lower tax) date to sell them is even further away. Even well-known companies see major shifts in stock value.

RSUs are also a different “class” of stock typically, meaning that in the event of a catastrophe your shares are not at the top of the list. Company goes under? More important investors get their payouts first, your shares may be worth literally zero. Less if you believe in lost opportunity costs, etc.

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