One thing to keep in mind is that you might not have until next April 15th to pay your taxes after exercise. If the exercise benefit is large enough compared to your typical income, you might owe estimated taxes that quarter.
Handcuffed to Uber
41–50 of 211 posts
Re: Handcuffed to Uber
#42I recently got an offer from Uber (didn't accept for various reasons), so I have a couple of data points. In the last two years, they started offering RSUs, not options, that addressed this issue. And two years ago, they had roughly 200 engineers vs 2000+ engineers now. The issues they had 2 years ago are different, as was the business, it wasn't nearly as ubiquitous and now since they offer RSUs, there isn't the same level of problems.
So it's another hit piece on Uber that is completely unfounded.
Re: Handcuffed to Uber
#43I recently got an offer from Uber (didn't accept for various reasons), so I have a couple of data points. In the last two years, they started offering RSUs, not options, that addressed this issue. And two years ago, they had roughly 200 engineers vs 2000+ engineers now. The issues they had 2 years ago are different, as was the business, it wasn't nearly as ubiquitous and now since they offer RSUs, there isn't the sam…
The latest Uber investment rounds require that employees hold onto their shares for one year after going public.
This will prevent employees from flooding the market post-IPO and devaluing the stock.
Re: Handcuffed to Uber
#44This article is wrong. Option strike prices and taxation are based on the 409A "fair market" valuation, not private valuations achieved during fundraising. Move the decimal one place to the left and the numbers in the article get a bit more realistic.
Actually, it depends. In Uber's case yes it would be the 409A as there is no secondary market. If there were a secondary market, it would be the last sales price from the day you exercised, not 409A value. The IRS guidelines say the spread between grant price and fair market valuation. If there's a secondary market, that's your fair market, not 409A (which is a joke anyway). Also, most companies use the last public v…
This is wrong information. 409A valuations are generally based on revenue models, profit models (not applicable for most startups) or comparatives. It's not done based on funding rounds because there's a lot of goodwill based in that.
Most companies push the 409A valuations as low as possible precisely because of income tax ramifications on exercise.
Re: Handcuffed to Uber
#45Earlier quoted context omitted.
No, that's incorrect (speaking as a founder who's raised $35mm and sold shares on the private market). Private financings will trigger a new 409a valuation but won't influence it. 409A valuations are typically based on Black Scholes and have no connection to private funding valuations. Secondary sales only affect fair market if there's a functioning secondary market, and AFAIK there are no private startups with a FUN…
You can do 409A however you want which is why I said it was a joke. I've worked in 2 places that based it off of last round after accounting for full dilution. You can use black Scholes, last round, or your finger in the air it doesn't matter. If it had to be accurate they wouldn't allow Black Scholes which has been all but disproven. Also there are lots of secondary markets for private companies right now. What make…
Okay thanks for confirming you don't know what you're talking about. Black scholes is options valuation and never used in 409A valuation. You can't just make stuff up, you have to justify it to your auditors.
Re: Handcuffed to Uber
#46I recently got an offer from Uber (didn't accept for various reasons), so I have a couple of data points. In the last two years, they started offering RSUs, not options, that addressed this issue. And two years ago, they had roughly 200 engineers vs 2000+ engineers now. The issues they had 2 years ago are different, as was the business, it wasn't nearly as ubiquitous and now since they offer RSUs, there isn't the sam…
The latest Uber investment rounds require that employees hold onto their shares for one year after going public. This will prevent employees from flooding the market post-IPO and devaluing the stock.
It also prevents employees from realizing any value if the stock price drops in the first year.
EDIT: Nothing quite like watching the public stock price decline while you're in your lockup period.
Re: Handcuffed to Uber
#47Pinterest allows employees to hold onto their options for seven years after leaving (if they stay at the company for two years) to avoid this scenario. I think there are a few other companies that have done similar things. http://fortune.com/2015/03/23/pinterest-employee-taxes/ Disclosure: I work for Pinterest
I read the Pinterest policy last year and ask my CEO about doing something similar during a company meeting. He just laughed. Then he apologized the next meeting for misunderstanding the question and still said no. I left the company.
what happened to the company?
Re: Handcuffed to Uber
#48In the past, when my wife has had options, we've always been able to use cash from the exercise and immediate sale to fund the transaction, with no cash out of pocket. Is this not an option available to Uber employees?
There's no liquid market for Uber shares. The article further states that Uber has taken measures to prevent a secondary market from developing. I wonder what those measures are. I imagine it's straightforward to prevent someone who wants to keep working at Uber from doing a secondary sale, but what sorts of contract terms can Uber put in place to prevent someone from quitting and then selling on the secondary market…
There's no liquid market for Uber shares.
I assume that in my wife's case, the company was buying the shares back (privately held firm and we weren't dealing in a secondary market). I guess I'm just surprised Uber doesn't do the same (actually, I'm not, given their C-suite's history of being all-around dicks).
Re: Handcuffed to Uber
#49I recently got an offer from Uber (didn't accept for various reasons), so I have a couple of data points. In the last two years, they started offering RSUs, not options, that addressed this issue. And two years ago, they had roughly 200 engineers vs 2000+ engineers now. The issues they had 2 years ago are different, as was the business, it wasn't nearly as ubiquitous and now since they offer RSUs, there isn't the sam…
The latest Uber investment rounds require that employees hold onto their shares for one year after going public. This will prevent employees from flooding the market post-IPO and devaluing the stock.
Do other companies have this clause in place?
Re: Handcuffed to Uber
#50Earlier quoted context omitted.
The market solution here seems to be the companies poaching those employees giving them, as a hiring bonus, enough cash to exercise their shares. Not sure what would make that workable, or if it's even a big enough problem to demand such a solution.
It's not just the exercise price, it's the tax bill at the end of the year...
If you exercise upon getting hired, there is no tax bill, because there is no spread between FMV and your exercise price. There's only a tax bill later, upon liquidation.