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Shopify lets staff decide cash-stock pay mix as shares dive

bloomberg.com

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Re: Shopify lets staff decide cash-stock pay mix as shares dive

#31

Post by gadders »

duxup wrote: post #27
mabbo wrote: post #18

In no way do I speak for my employer, but on a personal level, this has been amazing for me and I'm so grateful the company did this. I'm very conservative about investing, and don't want to have a large amount of my portfolio tied up in the company I work for. I'm maxed out on cash (there's a minimum equity portion at my level) and my additional income goes into a broader portfolio of investments.

>don't want to have a large amount of my portfolio tied up in the company I work for. Just before the .com bust a company I worked for decided to remove the option for employees to just dump their 401k contributions into company stock, and removed the option to direct a massive % of their paycheck into the company stock purchase plan. (I believe some of these limits became law later on but at the time it was legal) S…

It's 14 years since Lehmans went bust. Plenty of people there lost their wage and their investments (in Lehmans stock) when the company went under.

Stock options can be great, but you need to be aware of the concentration risk.

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#32

Post by helge9210 »

its_bbq wrote: post #17
shabbatt wrote: post #13

Earlier quoted context omitted.

When they were printing money endlessly and rates were low, your strategy is sound. However, the house of cards is now crumbling and there is no end in sight to rate rises. My hedge fund manager friend for a private family office is saying we will see double digit rates by end of 2023. If you believe this then you know what to do. If not, you should at least think what such macro conditions would do to liquidity.

ELI Financially Illiterate. What do high Fed interest rates mean in this case?

Stock price is calculated as a sum of future cash flows (dividends D, for example) discounted by time value of money (risk free rate r, for example): sum(P_n), where P_n = D / (1 + r) ^ n and n is a year. When rate r is up P automatically down.

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#33

Post by boringg »

mmastrac wrote: post #2

I obviously don't want to give financial advice, but every time I've traded cash for stock in comp it's worked out for me in spades in the long run. This doesn't happen for everyone, it might not happen for you, but it's been very good to me on three separate occasions. Just remember that it's terribly illiquid and you're going to doubt your decision, potentially up to a decade later.

If you did this at any time in the last 10 years you were probably rewarded handsomely. However the macro environment has significantly changed and I don't think your past behavior would be predictive of future performance.

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#34

Post by londons_explore »

tensor wrote: post #28

One crucial thing not often talked about with this plan is that the stock is granted and vests quarterly . In fact, the amount of stock you get each quarter is also variable. E.g. if you choose to have 100k of equity each year, each quarter you get whatever amount of units equates to 25k of stock. So what they've done is nearly completely untie compensation from the stock price. You neither benefit significantly nor…

So how is it different than just paying the employee cash and recommending that they buy shopify stock?

Is it just a user friction thing?

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#35

Post by paxys »

tensor wrote: post #28

One crucial thing not often talked about with this plan is that the stock is granted and vests quarterly . In fact, the amount of stock you get each quarter is also variable. E.g. if you choose to have 100k of equity each year, each quarter you get whatever amount of units equates to 25k of stock. So what they've done is nearly completely untie compensation from the stock price. You neither benefit significantly nor…

This is becoming more and more common at large tech companies. Stripe does the same thing.

Over the last decade and a half tech employees have enjoyed massive returns due to stock appreciation during their vesting term, and now employers want to eliminate that. Of course the flip side is that when the stock goes down - like right now - then employees benefit.

Ultimately they’re all going to cut out stocks entirely and just pay cash salary and bonus, like every other industry.

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#36

Post by rchaud »

its_bbq wrote: post #17
shabbatt wrote: post #13

Earlier quoted context omitted.

When they were printing money endlessly and rates were low, your strategy is sound. However, the house of cards is now crumbling and there is no end in sight to rate rises. My hedge fund manager friend for a private family office is saying we will see double digit rates by end of 2023. If you believe this then you know what to do. If not, you should at least think what such macro conditions would do to liquidity.

ELI Financially Illiterate. What do high Fed interest rates mean in this case?

- Higher int rates make it more expensive for companies to borrow, and to invest in additional production capacity. Depending on the company, this can cause their stock price to decline as lower investment usually signals lower revenue growth in the future.

- Higher int rates also encourage consumers to put money into savings accounts and bonds instead of stock markets, which lowers demand for stocks --> lower stock prices --> market indices fall as well (S&P500, Dow Jones Industrial Average). Movements in these indices are considered a barometer for the broader economy.

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#37

Post by modeless »

tensor wrote: post #28

One crucial thing not often talked about with this plan is that the stock is granted and vests quarterly . In fact, the amount of stock you get each quarter is also variable. E.g. if you choose to have 100k of equity each year, each quarter you get whatever amount of units equates to 25k of stock. So what they've done is nearly completely untie compensation from the stock price. You neither benefit significantly nor…

So it's not an equity grant at all then. It's an employee stock purchase plan. You choose how much of your compensation buys stock and you get a small discount on the purchase price (called "bonus" in the article). That is exactly an ESPP.

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#39

Post by WaxProlix »

londons_explore wrote: post #34
tensor wrote: post #28

One crucial thing not often talked about with this plan is that the stock is granted and vests quarterly . In fact, the amount of stock you get each quarter is also variable. E.g. if you choose to have 100k of equity each year, each quarter you get whatever amount of units equates to 25k of stock. So what they've done is nearly completely untie compensation from the stock price. You neither benefit significantly nor…

So how is it different than just paying the employee cash and recommending that they buy shopify stock? Is it just a user friction thing?

It's easier to make stock out of thin air (well, sort of) than cash, and accounting wise it's much more pleasant for companies to do so.

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#40

Post by knodi123 »

tensor wrote: post #28

One crucial thing not often talked about with this plan is that the stock is granted and vests quarterly . In fact, the amount of stock you get each quarter is also variable. E.g. if you choose to have 100k of equity each year, each quarter you get whatever amount of units equates to 25k of stock. So what they've done is nearly completely untie compensation from the stock price. You neither benefit significantly nor…

> So what they've done is nearly completely untie compensation from the stock price.

But it IS tied to the change in price- right?

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