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Ask HN: Are RSUs worth your loyalty?

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Re: Ask HN: Are RSUs worth your loyalty?

#81

Post by crmrc114 »

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…

Oh it gets even better! If you work for a nicely performing stock like a FAANG you can encounter this gem:

(Simple Round Numbers) 1. Get Base 100k + RSU 100k over 4 years 2. You work hard, company does better, yay! 3. Stock goes up RSUs now = 200k 4. I am sorry we cannot give you a raise because your total compensation = (Base+All RSUs) is over out allowable funding for your role. No raise for you! But keep up the good work! 5. Anytime yet get stock #3 happens... you get stuck with a low base and monopoly money.

Try getting a bank to give you a loan with a huge RSU number... it can be done, but oh my god what a PITA.

Re: Ask HN: Are RSUs worth your loyalty?

#83

Post by commandlinefan »

qeternity wrote: post #22
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.

If you get fired, unless it qualifies under some due cause, the options should immediately vest.

> options should immediately vest.

Well, I agree with you that they should, but they don't. I got laid off from a job a few years ago when my department was made redundant, and I only had 25% of my shares vested - they let me keep the 25% that was vested, but that was it.

Re: Ask HN: Are RSUs worth your loyalty?

#84

Post by Kirby64 »

makecheck wrote: post #70

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”…

At a publicly traded company, RSUs are definitely not worth $0 and shouldn't be treated as such. I agree you shouldn't base their value at some arbitrary inflated number and should live within your means, but if you truly think RSUs are worth $0, then you also think the company is going to go under (or you get fired) before they vest.

I typically value them at some percentage of the current value of the stock (less than 100%) depending on the company. For most signing bonus RSUs you're getting some of them after a year anyways. That's not a long time to wait, so risk/opportunity cost is low.

At a startup or some privately traded company, yeah sure. Their value is effectively $0.

Re: Ask HN: Are RSUs worth your loyalty?

#85

Post by awinder »

gigatexal wrote: post #80
awinder wrote: post #37

Earlier quoted context omitted.

RSUs should be a lot more reality based, these are not options to purchase on a hypothetical future liquidity event, they're restricted stock that turns into real shares on public markets upon vesting.

Ahh I was thinking they were options. Never mind. Does one still pay taxes every year on the RSUs should they rise in paper valuation before vesting?

Yeah kinda, you pay taxes on the market value of shares when they vest (become unrestricted). But only on the shares that have become unrestricted, not your still-restricted shares.

Re: Ask HN: Are RSUs worth your loyalty?

#86

Post by ryandrake »

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.

Look at it this way: say you make $100k per year. This means you’ve got $1M coming over 10 years! If you leave after 2 years, do you feel like you are giving up $800k?probably not. So why not think of RSUs the same way?

That’s how I think of RSUs: they aren’t yours until they vest: they’re just like future pay, so you’re not really giving anything up if you leave “early”.

Re: Ask HN: Are RSUs worth your loyalty?

#87

Post by darkarmani »

lnanek2 wrote: post #40
qeternity wrote: post #22

Earlier quoted context omitted.

If you get fired, unless it qualifies under some due cause, the options should immediately vest.

> If you get fired, unless it qualifies under some due cause, the options should immediately vest. That definitely didn't happen at my company. We had a round of layoffs and the package offered to people who signed an agreement not to sue only included a couple weeks of accelerated vesting. There was no performance management system in place either, so the people fired were basically just the bottom of the stack rank…

> (he was on a 10/20/30/40% schedule).

That's a terrible vesting schedule, but he still made millions on the 60% he vested?

Re: Ask HN: Are RSUs worth your loyalty?

#88

Post by darkarmani »

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.

> 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.

That's still wrong. They purchase date of the RSU is on the issue date. Vesting is unrelated. You are thinking of "exercising" an option. This is not an exercise.

1. You get a RSUs. They are actual stock, but they are encumbered by the vesting schedule. 2. When they vest, you are now allowed to trade them, but your ownership start date is from #1. If you had a 180 day vest, you'd have to wait until a full year is up to avoid short-term gains, but if vesting took longer than a year, you've already held them for longer than a year.

Re: Ask HN: Are RSUs worth your loyalty?

#89

Post by darkarmani »

mrbonner wrote: post #67
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.

If the vesting period is longer than a year, you shouldn't have a short-term gain. Secondly, you only make profit when you sell the stock, not when it becomes vested.

Re: Ask HN: Are RSUs worth your loyalty?

#90

Post by lonelappde »

ryaan_anthony wrote: post #75
mabbo wrote: post #55

You should think of RSUs no differently than you think of your paychecks. There is a scheduled date (every 2 weeks for my paycheck, every 6 months for my RSUs) where I will be given some dollars if I am still working here. I will pay income tax on that income. One is in the form of money and the other is in the form of stocks, but really you should sell those stocks and buy something more stable and not tied to your…

Or if the company is sold before you vest, the new management can decide not to honor your RSUs. It happened to me!

This is why legitimate companies vest quarterly or more frequently. Your 0.01% equity stake is does not make you a powerful investor.
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