121–130 of 136 posts
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Thats what put options are for.
If the derivatives market expects the value of the stock to settle downward post-IPO rush, then anybody selling you a put option would charge that expected difference and you still don't make any money.
Anytime you have both vesting schedules and at-will employment, your employer can fire you at any time and you will not get any unvested stock. Startups need to do this all the time when employees are underperforming or a bad fit. Renegotiating so that you can get a portion of that stock and stay employed is perhaps, if this were an isolated incident, a much better deal for the employee than getting fired. Where this…
It seems the company does not believe this to be the case. Possibly they are in a better position too know. Or they are beyond the phase where top talent is required to de-risk the business. Very calculating either way.
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Puts don't start trading immediately after the IPO. (There are also lockout/reporting requirements on derivatives, but I've always wondered how enforceable/detectable such transactions are.)
I just remember there being a famous story of Mark Cuban buying out of the money puts on Yahoo stock after the acquisition of Broadcast.com. Obviously a different scenario, but always reminded of this whenever IPO lockup talk comes up.
"After we sold Broadcast.com, I hedged my stock with synthetic indexes, in case the market cratered in the six months before I could hedge my actual Yahoo shares. It cost me $20 million, but I protected what I had."
http://www.fastcompany.com/magazine/63/fasttalk.html
So he effectively hedged out his dot-com-bubble risk, not his yahoo-is-relatively-speaking-a-turd risk.
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or you're fired and lose it all Take note white collar workers & high paying professional programmers, at-will employment and lack of employee rights can screw you too. If it was illegal to fire someone "for no reason", then it would be much harder for a company to screw employees like this.
Yeah, honestly this whole situation feels like a "come to Jesus" moment for HN. This type of screwage by corporations happens all the time to people across the U.S., whether it is pay cuts for the peons, unpaid overtime, layoffs where you have to do twice the job for the same pay, whatever. And HN has always danced right over them: "Sucks to be you, suckers! If you were really smart, you'd have joined a startup!! LOL…
The expected value of illiquid non-controlling stock is 0. There is no problem here. Don't take a job that pays you in unicorn horns and pegassus tails, folks.
Your point that people should not expect to make money from illiquid non-controlling stock is reasonable, though.
Anytime you have both vesting schedules and at-will employment, your employer can fire you at any time and you will not get any unvested stock. Startups need to do this all the time when employees are underperforming or a bad fit. Renegotiating so that you can get a portion of that stock and stay employed is perhaps, if this were an isolated incident, a much better deal for the employee than getting fired. Where this…
[I agree with all the points above, but wanted to add in the fact that early employees are rewarded for risk as well as production. Esp if they signed on for below market salaries, with stock calculated as deferred compensation.]
Asked: "Is not commercial credit based primarily upon money or property?" "No sir," replied Morgan. "The first thing is character." "Before money or property?" "Before money or anything else. Money cannot buy it...Because a man I do not trust could not get money from me on all the bonds in Christendom."
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I'm surprised that anyone is surprised. It's Zynga . Their business model has always been slimey, and they add no value to society. Net negative, actually.
Not only do they add no value to society, one could argue they are responsible for decreased productivity of employees who waste their work day playing Zynga games or come back to work tired after wasting 2 hours at night planting cucumbers on FarmVille.
But who cares? After all, it's unlikely the next Vonnegut is going to spend his time playing MafiaWars instead of writing "Slaughterhouse Five" or anything.
I am reminded of the aphorism, "Time you've enjoyed wasting is not wasted time."
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To be fair, people are asked to take cash pay cuts all the time. They're talking about unvested stock (future compensation). It's tough to defend this, though. I would assume that it would be a breach of contract, but I'm no lawyer.
It would seem that this could be solved through negotiation. Pincus needs the shares now to recruit top talent, and without the shares everyone's chances of a great exit are diminished. Pincus could sell his own shares, but would risk losing control. So Pincus should be willing to essentially write futures contracts on the proceeds from his own shares and trade those with employees, who should be willing to accept th…
Meanwhile, he's likely to see an exodus over the coming months of other good employees whom he didn't try to screw (this time) but who also now realise that the benefits of staying long term aren't necessarily worth the paper they're printed on.
You can pretty much write the rest of the story when something like this happens. The only question is whether people like Pincus himself will manage to cash out at some stage before Facebook intentionally or otherwise pulls the rug out from under Zygna in much the same way and the potential value of an IPO plummets.
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Not only do they add no value to society, one could argue they are responsible for decreased productivity of employees who waste their work day playing Zynga games or come back to work tired after wasting 2 hours at night planting cucumbers on FarmVille.
Can you help me understand the contempt you have for the Zynga games? I don't play, myself, but I do understand that the games exploit (negative? compulsive?) psychology, and they've used unethical business strategies. But who cares? After all, it's unlikely the next Vonnegut is going to spend his time playing MafiaWars instead of writing "Slaughterhouse Five" or anything. I am reminded of the aphorism, "Time you've…
Fulfilling a compulsion is not actually enjoyable. So unlike most game-makers, I don't see them as creating fun.