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Former Uber employees have gone into debt to exercise options they can’t sell

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Re: Former Uber employees have gone into debt to exercise options they can’t sell

#101

Post by look_lookatme »

abalone wrote: post #29

This 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…

> A 10-year exercise window is really a direct wealth transfer from the employees who choose to remain at the company and build future shareholder value, to former employees who are no longer contributing to building the business/ its ultimate value.

This is an investor bias toward recency that is ugly to see laid out so clearly. Work, foundational work even, only has intrinsic value if it happens between board meetings. On top of that, it's presented as a kind of wage-earner on wage-earner theft. Incredible.

Re: Former Uber employees have gone into debt to exercise options they can’t sell

#103

Post by influx »

lhorie wrote: post #42
influx wrote: post #19

Earlier quoted context omitted.

They hired too many, too fast. When I was there, the whole thing was chaos. Instead of using a cloud provider, they are building basic infrastructure because engineers have to do something. Beyond the obvious HR issues that Susan Fowler exposed, it was a bad place to work for almost any engineer. I would stay far away if you get an offer there.

> Instead of using a cloud provider As I understand, we tried using AWS to power key infrastructure but ran into scalability/cost issues. We still use 3rd providers for various things but my understanding is that a lot of this eng work is to reduce the costs incurred from these services. I do agree though, as a new hire, that the culture here is quite a bit on the NIH side, compared to a more traditional software sho…

I probably can't say a lot due to NDA, but does it make sense to you that AWS or Google Cloud can't scale to the level of Uber, such that Uber has to build their own datacenters and write their own Lambda equivalent?

Further, does it make sense that you'd rather buy hardware up front to scale for Halloween and New Years instead of being able to dynamically surge your infrastructure?

Re: Former Uber employees have gone into debt to exercise options they can’t sell

#104

Post by gamblor956 »

ryandrake wrote: post #86
gamblor956 wrote: post #47

Earlier quoted context omitted.

Wow. There are actually laws in place that say the rich are able to do things that poor people can't. This has been discussed many times on HN. The purpose of the law isn't to prevent "poor people" from doing anything. The purpose of the law is to prevent companies from making unregistered sales of stock to people who aren't (1) saavy enough to evaluate the risks of their investment or (2) wealthy enough to survive a…

> This has been discussed many times on HN. The purpose of the law isn't to prevent "poor people" from doing anything. The purpose of the law is to prevent companies from making unregistered sales of stock to people who aren't (1) saavy enough to evaluate the risks of their investment or (2) wealthy enough to survive a financial loss if the investment does not bear fruit. This is all true, however laws should be judg…

This law effectively allows rich people to do things that poor people can't.

You're still not getting it. The law does not stop poor people from investing in a private company. It simply prevents the company from advertising its stock to "poor people" unless the company registers with the SEC and demonstrates at least a minimal level of financial controls. A company can sell its stock to poor people as long as it does not solicit them. This is why employees and friends/family can buy stock of private companies.

I will repeat again for emphasis: there is no law that prevents "poor people" from buying private company stock.

Re: Former Uber employees have gone into debt to exercise options they can’t sell

#105

Post by SilasX »

seanmcdirmid wrote: post #98
SilasX wrote: post #94

Earlier quoted context omitted.

Right, and they also want to tax income , not accumulation of untradeable shares. They seem to want to treat it as income for purposes of determining tax liability, but not income for purposes of satisfying the very same tax liability. That's like trying to have your cake and eat it too. Reminds me of California's debt crisis and "Hey! How dare you turn down state IOUs as payment? These are every bit as good as cash.…

The rules are definitely not fair but that’s beside the point.

Beside the point of the GGGP's wish that tax liability on an unsaleable asset could be satisfied in kind?

Re: Former Uber employees have gone into debt to exercise options they can’t sell

#106

Post by gamblor956 »

rahimnathwani wrote: post #89
gamblor956 wrote: post #47

Earlier quoted context omitted.

Wow. There are actually laws in place that say the rich are able to do things that poor people can't. This has been discussed many times on HN. The purpose of the law isn't to prevent "poor people" from doing anything. The purpose of the law is to prevent companies from making unregistered sales of stock to people who aren't (1) saavy enough to evaluate the risks of their investment or (2) wealthy enough to survive a…

"But to address the direct issue: there are few, if any, Uber stockholders who hold 10,000 shares of the company but would somehow not qualify as an accredited investor." The article suggests there are folks who exercised 20,000 options (presumably representing one share each), but who had to borrow the money to exercise and to pay tax. Are you suggesting these people probably qualify as an accredited investor, or th…

I would say their situation is unusual, but based on Uber's valuation in 2016, they would have been accredited investors under the asset test if they held more than 20,000 shares.

It's unusual because the offer values the stock at significantly less than last year's valuations, so they might not be accredited investors anymore...if the Softbank deal goes through and sets a new FMV for Uber stock. (If the deal falls through, then the $33 offer isn't a useful gauge of current Uber stock value.)

The issue becomes when do you assess whether they are accredited investors: before the deal, using 2016 valuations, in which case they should qualify; or after the deal, using the deal's offer price, in which case they do not?

I've never actually dealt with this situation before, where the deal itself could change a potential investor's accredited investor status, so I couldn't say what the outcome would be.

Re: Former Uber employees have gone into debt to exercise options they can’t sell

#107

Post by mabbo »

gamblor956 wrote: post #47
mabbo wrote: post #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 cur…

Wow. There are actually laws in place that say the rich are able to do things that poor people can't. This has been discussed many times on HN. The purpose of the law isn't to prevent "poor people" from doing anything. The purpose of the law is to prevent companies from making unregistered sales of stock to people who aren't (1) saavy enough to evaluate the risks of their investment or (2) wealthy enough to survive a…

That's a really great counterpoint. I didn't know it was something well-discussed- I had only just read it for the first time today.

Re: Former Uber employees have gone into debt to exercise options they can’t sell

#108

Post by gamblor956 »

JumpCrisscross wrote: post #95
gamblor956 wrote: post #90

Earlier quoted context omitted.

I agree with you that it's not fair that the employees got screwed, but they got screwed because Softbank and Uber decided not to make the offer open to the employees that didn't have at least 10,000 shares. It has absolutely nothing to do with US securities law (or any other US laws), as the current laws don't prevent acquirers from buying stock from unaccredited investors.

> It has absolutely nothing to do with US securities law Nobody said it did. The top of the thread specifically calls out Uber, not securities laws, for being shitty.

Sorry, you're right about that but you're still misplacing the blame.

Softbank made the offer, not Uber. Under US law, the board didn't have much justification for rejecting the offer due to Uber's capitalization needs--the boardmembers could have been sued if they rejected it. Note that the board didn't approve the deal itself, they merely approved Softbank making the offer to the shareholders. The deal is contingent upon enough shareholders participating in the offer.

(Uber's capitalization needs matter here because it goes to whether the board is acting in the best interests of minority shareholders. In this case, the Board can say that w/o investment, those interests become worthless. This is different from a normal, revenue-generating company, like say Qualcomm, where the board can reject this sort of offer if they feel it undervalues the stock of the company, because in such case the lack of a deal doesn't impact the company's ability to operate as a going concern.)

Re: Former Uber employees have gone into debt to exercise options they can’t sell

#109

Post by osteele »

Something similar happened to Microsoft employees:

* "Microsoft Employees Face Tax Nightmare", AccountingWEB, Apr 19, 2001. https://www.accountingweb.com/tax/irs/microsoft-employees-fa...

* "Why Microsoft's Stock Options Scare Me", The Motley Fool, Feb 17, 2000. https://www.fool.com/archive/portfolios/rulemaker/2000/02/17...

* "Gates Regrets Ever Using Stock Options", Martin Wolk, NBC News, May 5, 2005. http://www.nbcnews.com/id/7713133/ns/business-eye_on_the_eco...

Re: Former Uber employees have gone into debt to exercise options they can’t sell

#110

Post by hinkley »

compiler-guy wrote: post #70
hinkley wrote: post #13

Earlier quoted context omitted.

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.

Options have value, but the value comes with a large variance and serious risk. From a financial perspective, what you want isn't $1,000 worth of options, but a _risk-adjusted_ $1,000 worth of options. Which means in all likelyhood, more like $100,000 worth of options. Oh, the company doesn't want to give you that much? Well then, "Show me the non-risky money."

10:1 or 20:1 would have sufficed, I think.

But I don't think managers understand that while options might make people stay while things are going well, they make them flee (or worse, stay and become resentful) when things are clearly not going well.

If you reward someone for their service you have to do it right or don't bother at all. A reward that loses its value, is delivered late, or requires the recipient to nag you constantly to deliver at all, has negative value for the person. 'Thanks for nothing' is not something you want to hear from an employee. It crushes motivation.

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