When a Unicorn Startup Stumbles, Its Employees Get Hurt
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Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt
#2Ms. Wyatt introduced BlackBerry’s chief, John S. Chen, who winkingly apologized for how his deal makers had driven Good’s final sale price down to $425 million, less than half of the company’s $1.1 billion private valuation.
I've never been a CEO or acquired a company but I think there probably aren't too many worse things you could say to the employees of a company that you've just acquired.
Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt
#3This article is written as if it's the startup's fault that tax laws are irrational. Doesn't reflect well on the NYT.
Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt
#4The fact that some employees have to pay taxes based on the valuations that VCs dream up terrifies me.
Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt
#5> Even worse, they had paid taxes on the stock based on the higher value.
That's the most annoying part of the entire article, and why I ask for salary rather than equity. Keep your stock, I'd rather pay my bills.
Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt
#6Ms. Wyatt introduced BlackBerry’s chief, John S. Chen, who winkingly apologized for how his deal makers had driven Good’s final sale price down to $425 million, less than half of the company’s $1.1 billion private valuation. I've never been a CEO or acquired a company but I think there probably aren't too many worse things you could say to the employees of a company that you've just acquired.
You should see how awkwardly he debuted one of the latest phones, and you'll understand. Might just be social awkwardness. (Still sucks, but feels microscopically less malicious).
Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt
#7This article is written as if it's the startup's fault that tax laws are irrational. Doesn't reflect well on the NYT.
The startup and/or its employees should have known the tax laws. It's not like this exact thing hasn't been happening for years and years.
(And it kind of is the startups fault that there isn't a way to exercise-and-sell the options. If it was a public company you wouldn't need to take the risk of a massive AMT bill)
Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt
#8Can the overpaid tax be claimed back?
Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt
#9This article is written as if it's the startup's fault that tax laws are irrational. Doesn't reflect well on the NYT.
The decision to accept a deal which valued the employees' equity so low compared to the VC owned equity is entirely the company's own.
I suppose you could argue that the tax system should be aware that common stock valuation should not be inferred from preferred stock valuation...
Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt
#10Regarding the fact that the employees had to pay tax on what turned out to be worthless shares:
They could have avoided this by waiting to exercise their options on the eve of the liquidity event. In this case there would have been no risk. But they exercised earlier presumably to start the clock on long term capital gains treatment for the stock they received when they exercised.
They took risk they didn't need to take and they got burned. It's worth keeping that in mind as another aspect to the story.