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For Airbnb employees, dream turns into disillusionment

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Re: For Airbnb employees, dream turns into disillusionment

#61

Post by sfrench »

H8crilA wrote: post #16
toomuchtodo wrote: post #15

Earlier quoted context omitted.

You have to have approval from the company to perform the transfer usually.

Why? What's so special about those shares?

Sometime around 8-10 years ago, requiring company approval for secondary sales started becoming a popular restriction to put into ISO grants (prior to that, it was just right of first refusal on sales). It's largely unfavorable to employees, but it does prevent some pretty bad situations. The benefits of this restriction were explained to me as two major things:

1) By preventing secondary sales, the company can control the going price for the stock. This means when the company has an independent third party do a 409a valuation, they don't have to take into account high third party sales, which would push the 409a up. Not inflating the 409a is beneficial to employees that want to leave the company and exercise stock. It means their AMT tax hits won't be as bad.

2) It also means the company/board get to control who are investors in the company, and thus who has the ability to request to relevant internal company information (like financials).

Re: For Airbnb employees, dream turns into disillusionment

#62

Post by techslave »

bgentry wrote: post #17
pmorici wrote: post #8

"two tranches of employee equity that are set to start expiring in November 2020 and in mid-2021; those shares will become worthless if the company is not trading publicly by then, they said." I don't understand the above statement. How does not being publicly traded make the options worthless? Doesn't it just make them more risky because you have to put up a pile of money w/o knowing when and at what value you will…

Incentive Stock Options (ISOs) apparently have a 10 year expiration window on them. If you were granted ISOs in 2010 but did not exercise them, you may have less than a year remaining to do so before they are lost forever. You could exercise them, but for an early employee at a company like Airbnb that may mean literally millions of dollars in taxes that would have to be paid on an asset that can’t be sold, one that…

with RSUs though, the company can re-up them with no penalties

Re: For Airbnb employees, dream turns into disillusionment

#63

Post by techslave »

H8crilA wrote: post #12

It is ironic that no one has disrupted this market yet. Pre-IPO shares can be traded - you just have to trade those with accredited investors, prior to the form S-1 filling. I'm sure there's plenty of accredited investors out there that would accept startup shares at, say, 5-10% discount. Put another 2-3% transaction costs on top of that and you got yourself a very nice and socially pleasing enterprise.

you’ll not find any offers at only 5-10% discount

Re: For Airbnb employees, dream turns into disillusionment

#64

Post by GhettoMaestro »

ummonk wrote: post #10

>Starting in 2011, when the young company topped a $1 billion valuation, Airbnb prohibited workers from selling shares, while allowing its three founders — Chesky, Nathan Blecharczyk and Joe Gebbia — to cash out a total of $21 million. This seems to be a common story with most startups. Founders making sure to get liquidity for themselves but not doing the same for employees.

I know there are always reasons, but I feel that restrictions on selling should be focused at the leadership or investor class. Locking up your employees while allowing leadership to cash out is a surefire way to piss on any goodwill that you may have built over time.

Also, it strikes me as just fundamentally wrong from a fiduciary point of view.

Re: For Airbnb employees, dream turns into disillusionment

#65

Post by doublerebel »

bgentry wrote: post #17
pmorici wrote: post #8

"two tranches of employee equity that are set to start expiring in November 2020 and in mid-2021; those shares will become worthless if the company is not trading publicly by then, they said." I don't understand the above statement. How does not being publicly traded make the options worthless? Doesn't it just make them more risky because you have to put up a pile of money w/o knowing when and at what value you will…

Incentive Stock Options (ISOs) apparently have a 10 year expiration window on them. If you were granted ISOs in 2010 but did not exercise them, you may have less than a year remaining to do so before they are lost forever. You could exercise them, but for an early employee at a company like Airbnb that may mean literally millions of dollars in taxes that would have to be paid on an asset that can’t be sold, one that…

If the options are expiring, the company can choose to 1) foot the tax bill for the employee via payment or buyback, or 2) reissue the options as RSUs. Only some companies make that choice, but it's certainly legally possible to work through the 10-year legal expiration for ISOs.

I know this from experience, but here is a reference with good detail (no affiliation): https://www.founderscircle.com/10-year-expiration-of-incenti...

Re: For Airbnb employees, dream turns into disillusionment

#66

Post by Judgmentality »

rco8786 wrote: post #60
Judgmentality wrote: post #39

Earlier quoted context omitted.

> Airbnb is by all accounts a wildly successful company I remember 5 years ago when I turned down a lucrative offer from Uber because I just didn't believe in the company. People told me I was crazy, that Uber was the future of transportation, and how could I not understand how stupid I was? I just looked the fundamentals and said it will never make money. AirBnB and Uber are very different companies, the most notabl…

Uber the company will probably never make money. But you would have likely made plenty post-IPO

If all you want to do is make money, you should enter finance instead of tech.

Re: For Airbnb employees, dream turns into disillusionment

#67

Post by ummonk »

ramraj07 wrote: post #34
human20190310 wrote: post #26

Earlier quoted context omitted.

In addition to that, the founders are signaling their own long-term lack of confidence by selling their shares when no one else is allowed to do so. Employees are correct to pressure their employers to IPO or GTFO, especially considering that many of these companies are on a trajectory where they're worth less over time (e.g. the collapsing valuations of Uber, Lyft, Slack, "We", etc).

True in the case of wework yes but in the case of Airbnb the founders seem to have collectively cashed out only a few tens of million, which just sounds like they cashed out just enough to buy themselves nice cars or something

Employees would like to cash out enough to get downpayments on pricey Bay Area homes too, but screw them amirite?

Re: For Airbnb employees, dream turns into disillusionment

#68

Post by human20190310 »

kjksf wrote: post #55
human20190310 wrote: post #44

Earlier quoted context omitted.

If the founders are hedging their bets and asking (or requiring) others not to, it's a bad sign.

If I had 500 million in paper valuation and could turn 10 million into real dollars, I would do it and so would you. I would have to be an idiot not to do it. Not being able to sell shares in private companies is a standard practice. There are good reasons for that. The reason public market is heavily regulated is to prevent fraud. The fact that large shareholders can sell shares in companies is also a standard pract…

> I would do it and so would you. I would have to be an idiot not to do it.

It's smart. That doesn't mean it shouldn't be criticized. It's forcing employees and others to take risks (specifically an equity position that cannot be partially sold to hedge against company failure) that the founders are not willing to take themselves.

Re: For Airbnb employees, dream turns into disillusionment

#69

Post by Apocryphon »

rco8786 wrote: post #60
Judgmentality wrote: post #39

Earlier quoted context omitted.

> Airbnb is by all accounts a wildly successful company I remember 5 years ago when I turned down a lucrative offer from Uber because I just didn't believe in the company. People told me I was crazy, that Uber was the future of transportation, and how could I not understand how stupid I was? I just looked the fundamentals and said it will never make money. AirBnB and Uber are very different companies, the most notabl…

Uber the company will probably never make money. But you would have likely made plenty post-IPO

Are the golden handcuffs even off yet? There's still months to go for the shares to fall...

Re: For Airbnb employees, dream turns into disillusionment

#70

Post by H8crilA »

sfrench wrote: post #61
H8crilA wrote: post #16

Earlier quoted context omitted.

Why? What's so special about those shares?

Sometime around 8-10 years ago, requiring company approval for secondary sales started becoming a popular restriction to put into ISO grants (prior to that, it was just right of first refusal on sales). It's largely unfavorable to employees, but it does prevent some pretty bad situations. The benefits of this restriction were explained to me as two major things: 1) By preventing secondary sales, the company can contr…

Both of these points increase the power of the insiders over the power of all shareholders. It's very anti capitalistic, and I stand by calling these rules dirty.

Company is not supposed to control its share price. Company is supposed to be subjected to its shareholders.

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