131–140 of 211 posts
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RSU's are sold at vest to cover taxes.
But if Uber isn't yet public, and won't allow a market in its shares, who would one sell the shares TO to cover the tax?
This is why what is happening with the digitization of private equity through blockchain technologies is going to make this kind of thing completely obsolete. https://blog.coinfund.io/explaining-blockchain-to-traditiona...
No amount of blockchain technology is going to stop a company from suing you when they find out you sold stock.
Rather digital equity and governance systems [1] that are currently being built around blockchain and decentralized projects simply take a much more egalitarian and healthy approach to distributing ownership in the first place. And, hey, if you want to use equity as an incentive for retaining employees, you still can do that using (for instance) a smart contract in a way that is fair and not concentrated as a power in the signature of a single person.
At the end of the day, traditional private equity whether it is an investment or as compensation has a lot of problems, as I'm sure HN readers on here know very well.
[1] Most forward-thinking real world example: http://daohub.org
> Not only does it not allow employees to sell their shares to secondary buyers, it also won’t allow them to use services like those offered by 137 Ventures, which makes loans to founders and early employees using their stock as collateral. (Snapchat, Dropbox, and Airbnb have similar policies.) Does keeping early employees "handcuffed" essentially as indentured servants until IPO align with YC's ethics policy?
According to Glassdoor this is in the same ballpark as Facebook, Google, Twitter, etc [1].
You are not really making the startup "worse salary but potential equity" trade by working there, when the straight-out-of-college salaries are similar to the averages across all of Google.
[0] https://www.glassdoor.com/Salary/Uber-Software-Engineer-Sala...
[1] https://www.glassdoor.com/Salaries/san-francisco-software-en...
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I read it as hyperbole for the sake of making a point. I don't think the OP meant it literally. But, debating that term seems to be getting away from the main point--that an employee could have an option on a sizable asset with no way to assert ownership of the asset, despite having fulfilled the vesting requirements set forth in the stock option agreement.
I'm not sure it is getting away from the main point. The OP's original assertion was that Uber is acting unethically, and calling the arrangement "indentured servitude" was meant to highlight how Uber's actions are morally wrong. I disagree. The employees who are saddled with options they can't exercise are adults who agreed to the terms of their employment. They are free to quit Uber and work somewhere else if they…
I can't refute your second paragraph. You're totally correct on every assertion. I just happen to think it stinks, and I happen to think Uber is taking advantage of the situation. There are other companies who recognized this issue and chose to remediate it (to their employee's benefit), rather than exploit it.
So yeah, it's another way to lose the options lottery. I'm glad I know about it now. I'll add it to my list of things to look out for.
What happens if they decide to keep the company private? Travis, the CEO of Uber, has stated many times he feels like going public isn't needed anymore because of all the extreme amounts of capital available in the private market. And, they have found a spigot on the economy that can provide for returns for these private equity investors. So why even go public? To me, this just seems like a well thought out plan to k…
> What happens if they decide to keep the company private? The shares can still be sold, but it's limited to qualified investors. The primary issue is that obviously the same information of a public company isn't available & the SEC doesn't want Joe Smith getting scammed by fly-by-night operations. It's also worth noting that once there are a certain number of shareholders, Uber has to publicly disclose its finances.…
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This is an interesting conversation. I wish someone with readily verifiable credentials could weigh in. I'm not saying the parent, or GP do not have the credentials, just that they've not been established. I'd love to hear from an accountant or tax attorney on the topic. From what I can tell, taxes will be based on the values in Form 3921 (for ISOs and ESPPs), which is delivered by the employer.[0] Here's a sample 39…
If you get a 3921, use what's there; the burden of accuracy is on the company. I worked at a place that didn't issue 3921's (in the .com go round). I had a hell of a time reaching someone still at the company who could give me that information almost a year later (and after several rounds of devastating layoffs). I really don't know what she based the figure on.
[0] http://www.startuplawblog.com/2011/01/05/companies-remember-...
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You don't exercise RSUs. RSUs are taxable as they vest. At my company, a portion of your vesting RSUs are sold every time to pay the tax on them, unless you provide some cash to pay the tax.
Right, I am interested in whether they would do this during the lockup period. It would seem that if employees were contractually obligated to hold their positions, selling to cover taxes wouldn't be allowed.
In any case, Uber has to pay the withholding, and i suspect they have no magic way around this.
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Black Scholes is used to value options, eg to set the strike price on options. So, it is used for this purpose by companies who need to set option strikes at fmv. I have no idea why he says it's been repudiated. As far as I know, it is still used in public market option pricing. Most people buying or selling options are not pricing them, but accepting the market makers price. How would you have any clue how they're c…
I previously wrote software at a major market maker. I can't say (NDA) what they use, but most professionals consider Black Scholes to be mickey mouse. If you're using it in the public market, you're not going to fare well on American style options. As for real world proof of Black Scholes being garbage, it doesn't get any better than Long Term Capital Management.
Edit: people buying/selling options are of course performing their own pricing operations. They don't care how the market price is determined, since they believe their model is the best and gives more accurate prices than anyone else.
Edit 2: furthermore, to properly price startup options, you need to account for their 'random-expiration' nature: we have no idea when Uber will IPO. this makes it difficult to use traditional option pricing models which have fixed maturities (you can take integrals over the model's results at each possible maturity). additionally, choosing a discount rate is hard when realizing that most employees are not well-diversified, unlike the investors/funds that the traditional models are written for
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Options are inherently risky and should be accepted as compensation with the knowledge that there is a non-zero chance that they might turn out to be worth nothing. What's described in the article is an interesting way for those options to be effectively worthless, but it's not materially different (for an option-holding employee without unlimited means) from Uber going bankrupt or having all unvested options cancell…
The twist here is that the options end up worthless despite the hard work of the employee that leads the company to be successful. The options are supposed to incentivise this. Something about the incentive structure is wonky---in the case of Uber going bankrupt then the options "should" be worthless. But if Uber succeeds, then the incentive should pay out.
The reason we're focusing on the 90-day clock for exercising options (and the attendant bill) is that it's something that happens to a single employee when he or she leaves the company, as opposed to something that affects all the employees all at once. But I'm not sure that changes the aggregate analysis. It feels different, but I'm not sure that it is different. When you an employee joins a start-up, he or she is taking a risk that part of their compensation could end up worthless. The corresponding reward for that risk is the chance for that compensation to be worth beyond their wildest imaginings. If that risk/reward ratio is not to their liking... well, Google is hiring, aren't they?