I'm sure Uber would like the secondary market to be illegal, but Uber embodies disruption.
Former Uber employees have gone into debt to exercise options they can’t sell
21–30 of 190 posts
Re: Former Uber employees have gone into debt to exercise options they can’t sell
#22Why is this even news? This is the case for pretty much every privately-held company in the valley, because the tax law dictates that [1]. When Pinterest changed their exercise window from 90 days to 7 years, it was big news [2]. When you leave a privately-held company, you have to convert your stock options to stocks to hold onto them, and then AMT kicks in and taxes you on the spread and that often hurt a lot. But…
> This is the case for pretty much every privately-held company in the valley
Many companies allow employees and ex-employees to sell shares.
Re: Former Uber employees have gone into debt to exercise options they can’t sell
#23Yet another reason why taking startup stock sucks. Oh? You managed to actually get stock in a startup that seems to be worth something? And you didn't get diluted to a pittance? And the board / founders didn't try to fire you or ask you to give stock back to the pool? Lucky you, you're one of the 1% of the 1%. Now stay there until the company sells or goes public. Wait -- they got bought? Congratulations, you just wo…
The moment for me when I realized that options were bullshit was when I got a story about how “we wanted to give you a bigger raise but it’s not in the budget, so here’s $3k less and $3k worth of options” As if options had a value.
Yeah they always assign a dollar amount to options instead of a % amount which is what really matters.
$100,000 in options sounds great but if it’s .01% of options then you’ll have to be part of a monster IPO or sale to get a windfall.
Always insist on the % amount. Most founders will try not to share it.
Re: Former Uber employees have gone into debt to exercise options they can’t sell
#24Can someone tell me what the rules are from companies who are already listed on NASDAQ and trading publicly?
For example say if I join company X today (where X could be Intel or Cisco or a similar company) and I have 40 RSUs vesting over 4 years. After 2 years I decide to leave X. 20 RSUs would have been vested.
I clearly understand that I am going to lose the 20 unvested RSUs completely. My question is about the 20 vested RSUs. Is there a maximum time limit before which I must sell these 20 vested RSUs? Or can I keep these vested RSUs with me for life and choose to sell them whenever I wish?
If it is indeed true that I can keep these vested RSUs with me for life, how exactly would I be selling these RSUs, say after 20 years? I mean, the company does not give me these RSUs directly on printed paper. The RSUs are held in an account in a website of a finance company such as UBS. I log into my UBS account to access my RSU details and sell them. What if UBS goes out of business in 20 years?
Re: Former Uber employees have gone into debt to exercise options they can’t sell
#25> To qualify for the tender offer, participants must have at least 10,000 Uber shares and be “accredited investors,” an SEC designation (pdf) for wealthy individuals.
From the SEC link:
> An accredited investor, in the context of a natural person, includes anyone who:
> earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR
> has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence)
Wow. There are actually laws in place that say the rich are able to do things that poor people can't.
If you're a former Uber employee who moved somewhere with lower incomes and cost of living, you probably no longer meet the criteria needed to sell these stocks.
Re: Former Uber employees have gone into debt to exercise options they can’t sell
#26Yet another reason why taking startup stock sucks. Oh? You managed to actually get stock in a startup that seems to be worth something? And you didn't get diluted to a pittance? And the board / founders didn't try to fire you or ask you to give stock back to the pool? Lucky you, you're one of the 1% of the 1%. Now stay there until the company sells or goes public. Wait -- they got bought? Congratulations, you just wo…
Another detail that's not well-known unless you know someone who's gone through it: buying your shares comes with a huge tax bill.
As I understand it, you have to pay tax on the difference between the option price and the value at the time you buy them. So if you have a bunch of options to buy at $10 per share, and the company grows to $90 per share by the time you quit/have to buy your shares, you're taxed on $80 a share. Remember, stock in a private company is worthless until you find a buyer, which is one of the reasons the people referenced in the article had to go into debt to exercise their options.
30% of a large amount of imaginary money ends up causing a gigantic tax bill, paid in actual money.
Re: Former Uber employees have gone into debt to exercise options they can’t sell
#27Can someone tell me what the rules are from companies who are already listed on NASDAQ and trading publicly? For example say if I join company X today (where X could be Intel or Cisco or a similar company) and I have 40 RSUs vesting over 4 years. After 2 years I decide to leave X. 20 RSUs would have been vested. I clearly understand that I am going to lose the 20 unvested RSUs completely. My question is about the 20…
All your granted shares go to your brokerage account. Those are insured by SIPC insured up to a limit. You can sell your shares whenever you want except for certain blackout dates around earnings if you are still employed by that company.
Re: Former Uber employees have gone into debt to exercise options they can’t sell
#28Can someone tell me what the rules are from companies who are already listed on NASDAQ and trading publicly? For example say if I join company X today (where X could be Intel or Cisco or a similar company) and I have 40 RSUs vesting over 4 years. After 2 years I decide to leave X. 20 RSUs would have been vested. I clearly understand that I am going to lose the 20 unvested RSUs completely. My question is about the 20…
They're your shares. They are held in an account sponsored by the employer, but they are yours just like if you bought them from schwab.com.
I don't know what happens if a brokerage goes out of business, but I imagine you're in the same boat as all the people who bought those shares with cash on the open market. Once the stock vests, it's yours.
Re: Former Uber employees have gone into debt to exercise options they can’t sell
#29This reflects one of the more notable changes of late in the basic SV startup template. More companies are going with so-called "extended" exercise windows, converting from 90-day-window ISOs to multi-year-window NSOs upon exit. Zach Holman (ex-Github) wrote a short, fun post on this a couple years ago.[1] Y Combinator has made it their standard around when Pinterest did it as well.[2]
It was fun to watch Andreessen Horowitz criticize[3] ten year windows and then backtrack[4] after a public flogging. That was when the power balance shifted towards more employee-friendly terms.
The part of this I'm still trying to figure out is when does it makes sense to offer RSUs over ISO/NSOs. My general sense is it works better for bigger companies than tiny startups, but I forget the details.
[1] https://zachholman.com/posts/fuck-your-90-day-exercise-windo...
[2] https://news.ycombinator.com/item?id=11198991
[3] "A 10-year exercise window is really a direct wealth transfer from the employees who choose to remain at the company" https://a16z.com/2016/06/23/options-timing/
[4] "the 90-day exercise essentially pits cash-rich employees against cash-poor ones. And that isn’t right." https://a16z.com/2016/07/26/options-plan/
Re: Former Uber employees have gone into debt to exercise options they can’t sell
#30>Until this year, Uber gave former employees 30 days to exercise their options, an unusually short window of time. Is this the standard time window for exercise?
As far as I know, Pinterest was the first company to give a sane amount of time to exercise options:
https://medium.com/@michaeldeangelo/unlocking-the-golden-han...
They give you 7 years to buy, so you don't get stuck with a huge tax bill between exercising the options and being able to sell shares.