Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave • Hacker News Board

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#121

Post by frostmatthew » Mon, Apr 16, 2018, 12:43 PM UTC

walshemj wrote: post #102

rifung wrote: post #31

Earlier quoted context omitted.

This exactly. I work at Google and it astonishes me how surprised people are when I tell them I use autosale, the company program where your stocks are sold immediately as they vest. They always ask "Don't you think Google stock is going to go up?" And I always reply that yes I do think it will go up but 1) that's not the right question to ask, you should ask whether it will go up more/less than anything else you cou…

Would you not want to sell stock you have held for some time to take advantage of lower capital gains - or do the US tax authorities assume you are selling older stock first?

If you sell right when it vests there's a negligible capital gain (or loss). The value of the RSUs are taxed at regular income when they vest. Any difference between that value and the value when you sell them is a capital gain (or loss) and that is what's subject to capital gain taxes. i.e. if you sell once they vest the capital gain/loss is essentially zero (because the stock hasn't had time to move much)

e.g. if your RSUs are valued at $1000 when they vest and you sell it a few minutes later and the value is now $1005 you'll pay regular income taxes on $1000 and have a $5 capital gain (i.e. when you file your taxes the cost basis for the holding are $1000, not $0)

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#122

Post by moorhosj » Mon, Apr 16, 2018, 12:46 PM UTC

adventured wrote: post #65

toephu2 wrote: post #55

Earlier quoted context omitted.

So? A rising tide lifts all boats.

You don't buy these companies to catch a temporary rising tide. Market timing is more often financial suicide, one of the worst mistakes amateur investors make. You buy for the growth and long-term picture. If you believe in the growth potential, you buy in at an early opportunity. ServiceNow's stock has gone up six fold in less than six years. Their revenue has climbed from $424m in 2013, to $1.93b in 2017. The last…

ServiceNow doesn’t have a dividend, your other examples do. They are different types of investment, growth vs. value.

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#123

Post by garmaine » Mon, Apr 16, 2018, 12:51 PM UTC

walshemj wrote: post #114

garmaine wrote: post #112

Earlier quoted context omitted.

It is taxed as income regardless at the point of vesting.

I think the op was saying that you already owned the stock - that now becomes worth 1,000,000 and presumably would have paid income tax for the FY when you vested. You surly don't pay income tax on the gain of already owned stock but CGT. Back in the day 2000's I did own stock that was worth over 1,000,000 certainly wouldn't have had to have paid income tax if we had been bought out at point - but that was in the UK

This subthread is about selling at point of vesting. Unless you are a founder with a 86(b) election, when you vest it is income.

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#124

Post by walshemj » Mon, Apr 16, 2018, 12:58 PM UTC

danieltillett wrote: post #120

walshemj wrote: post #110

Earlier quoted context omitted.

No its part of the employees comp - you seem to have a very 19th century Dickensian view of employees.

Not at all. I just think the employees should be paid in cash and not in shares as a way to hide the total compensation cost.

Ah so we should just tug our caps and be good little peasants and get above ourselves and say "thankee kindly master Frodo after saving the world ill just get right back to cutting the grass at bag end"

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#125

Post by mbesto » Mon, Apr 16, 2018, 1:01 PM UTC

mathattack wrote: post #81

rifung wrote: post #31

Earlier quoted context omitted.

This exactly. I work at Google and it astonishes me how surprised people are when I tell them I use autosale, the company program where your stocks are sold immediately as they vest. They always ask "Don't you think Google stock is going to go up?" And I always reply that yes I do think it will go up but 1) that's not the right question to ask, you should ask whether it will go up more/less than anything else you cou…

#2 is the dominant point. One of the subtle points on diversification is that it's ok to take less returns if they are uncorrelated to your other investments - you want things that go up when your main investments go down. Even if you're 90% sure that Google will beat the market, you want protection for the 10% case. (And yes - your human capital will take the upside when Google continues to do well)

This is not investment advice - but the other personal finance protip I've learned is - don't put a high percentage of your high net worth in the success of your immediate work. This is why you see SV-elite raising rounds (Levchin - Affirm, Moskovitz - Asana, Williams - Medium, etc) and not just using their own capital. It feels very counterintuitive if you're a founder, because you likely made a large portion of your net worth due to investing in your own merits.

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#126

Post by gwbas1c » Mon, Apr 16, 2018, 1:03 PM UTC

mgummelt wrote: post #24

baron816 wrote: post #18

Let’s say the company you work for goes public and your stock is suddenly worth $1,000,000 (as an example). A wise investor, you normally put all of your other savings into broad market index funds. Now, do you sell your company’s stock that was given to you and took you four years to vest into, or do you hold on to it and hope the valuation keeps rising? (This is a rhetorical question btw)

If you had $1MM in cash, how much of it would you use to buy the company's stock?

I think it's really dumb to buy your employer's stock on the open market. (Not including whatever stock plan you already heave,) You're already exposed to risk from loosing your job.

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#127

Post by gwbas1c » Mon, Apr 16, 2018, 1:07 PM UTC

rifung wrote: post #31

mgummelt wrote: post #24

Earlier quoted context omitted.

If you had $1MM in cash, how much of it would you use to buy the company's stock?

This exactly. I work at Google and it astonishes me how surprised people are when I tell them I use autosale, the company program where your stocks are sold immediately as they vest. They always ask "Don't you think Google stock is going to go up?" And I always reply that yes I do think it will go up but 1) that's not the right question to ask, you should ask whether it will go up more/less than anything else you cou…

I like to keep various employee stock grants for about a year, mostly so I feel like I have "skin in the game."

In general, though, my employee stock is usually not much. If I had a huge windfall of stock, I'd probably consult a financial planner and sell much sooner.

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#128

Post by rhlsthm » Mon, Apr 16, 2018, 1:09 PM UTC

mistermann wrote: post #51

sp527 wrote: post #35

Earlier quoted context omitted.

Isn’t that just a long-winded way of saying that early investors, who take on more risk, earn superior returns? As for the barriers to the general public investing in risky startups, that’s a feature not a bug. Look no further than dotcom 1.0 or the present day ICO market to understand why.

Not really, with initial and intermediate funding now being covered by deep pocketed VC's, the public no longer has the chance to invest in earlier stages of the development cycle. Regardless of whether this is good or bad, it is different .

This isn't really true. If you actually wanted to and tried to put in early stage money, you could. Lots of startups raise their first few hundred K from "friends and family" type rounds and are usually readily looking for small investors to write small (25k or even less) checks.

I would bet within a couple degrees of separation within your network you can find someone raising money for a project you're at least somewhat interested in. There are also platforms like AngelList that are making it easier to fund deals with small money.

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#129

Post by sharemywin » Mon, Apr 16, 2018, 1:22 PM UTC

baron816 wrote: post #18

Let’s say the company you work for goes public and your stock is suddenly worth $1,000,000 (as an example). A wise investor, you normally put all of your other savings into broad market index funds. Now, do you sell your company’s stock that was given to you and took you four years to vest into, or do you hold on to it and hope the valuation keeps rising? (This is a rhetorical question btw)

Not really a binary question. So it might be better to think about it as what mix of stocks(including the one I work for) should I own with my portfolio? Especially since my job is tied in with XYZ company. Anything less than 50% in the broad market would be very risky. In fact you might want to think about aghast some % bonds.

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#130

Post by gok » Mon, Apr 16, 2018, 1:34 PM UTC

styrophone wrote: post #94

gok wrote: post #74

Earlier quoted context omitted.

Note that not all stock compensation is the same. It sounds like you’re talking about restricted stock units, but with (say) ESPP, immediate sales can have less-than-optimal tax implications.

Is there a relative tax advantage to waiting to sell ESPP shares? AFAIK, an ESPP discount counts as earned income in the same year, and LTCG tax advantages would only apply to growth, which would be the case for holding any other stock over that period.

If you sell ESPP without waiting a year, that’s a disqualifying disposition. The difference between purchase price and sale price is taxed as ordinary income. If you hold it for a year after the sale (and 2 years after the grant), that’s a qualifying disposition, and you pay the lower of the discount or the profit from the sale price as ordinary income and the rest of the gains as LTCG.

If the stock is generally not going down and your company does the typical “you pay the lower of the first and last day price of the offering period” thing (a look-back provision), holding the stock is the only way to get preferential tax treatment on that part of the benefit. Of course this isn’t a sure thing; you do risk the stock going down before you finally sell.