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

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

#111

Post by marcinzm »

saagarjha wrote: post #90
marcinzm wrote: post #80

Earlier quoted context omitted.

I'll given an example. If you had $200k in yearly cash compensation from Apple starting in 2019 then you'd make $200k this year. If you had $200k in yearly RSU compensation from Apple starting in 2019 then you'd make $800k this year.

If you had $200k in yearly TWTR you’d make $100k this year. Things don’t always go up.

If you joined in 2019 then you'd make around $200k this year. Last year you'd have made around $350k. Still better or equal to getting cash every year.

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

#112

Post by idontpost »

spaceywilly wrote: post #96
marcinzm wrote: post #80

Earlier quoted context omitted.

I'll given an example. If you had $200k in yearly cash compensation from Apple starting in 2019 then you'd make $200k this year. If you had $200k in yearly RSU compensation from Apple starting in 2019 then you'd make $800k this year.

Couldn’t you use the 200k cash alternative to buy AAPL, theoretically, and end up in the same boat? And in that case you can also buy a mix of other stocks to diversify instead of having it all in one company. I’d take cash any day personally.

> Couldn’t you use the 200k cash alternative to buy AAPL, theoretically, and end up in the same boat?

No you couldn't.

You'd have to put in several years of 200k of cash up front to end up in the same boat.

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

#113

Post by spaceywilly »

Sohcahtoa82 wrote: post #101
spaceywilly wrote: post #61

Earlier quoted context omitted.

If your company had offered you the cash value of RSUs instead of the RSUs, would you not have ended up in the same position financially? For example, if your base pay was 200k, and you had a grant of RSUs worth 200k, how is that better financially than getting all 400k in cash?

I joined a startup last year and was given a $200K salary and $50K in stock options. If we're successful and reach a valuation of $5B, my options will be worth $1M. And that's not even accounting for evergreen option grants and bonuses.

“if” is the key word there. Most companies don’t make it to IPO, and even if they do it would be a long wait. In the mean time your shares are illiquid, the paper they are written on is worth more. I’d prefer to take the cash alternative and put it into safe investments.

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

#114

Post by disgruntledphd2 »

hedora wrote: post #91
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…

I have heard of these. I wouldn't accept an offer like this unless the fixed comp was 2-3x normal market value for my services. (The stock of my employers usually goes up during my vesting periods, and usually by well more than is needed to double my total comp -- the 2-3x is risk adjusted)

If your career mostly spans the last decade, it should be noted that this was a really really weird decade in terms of asset appreciation vs inflation.

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

#115

Post by idontpost »

JAlexoid wrote: post #100
taxman22 wrote: post #79

Earlier quoted context omitted.

You’d be granted $200k in RSUs over 4 years, but actually be getting, 20,000 RSUs if the stock price was $10. Fast forward a few years and the stock is trading at $100. You’re now earning 10x more. Edit: added “over 4 years”

Or you could get that cash and buy the same stock, without restrictions that come with RSUs. Oh... also... "Tax Man 22" - RSU grants are taxed at the time they vest. So if your 20000 RSUs vest at $100, then you pay regular income tax on $100... not lower capital gains tax on the $90 per RSU. Just the tax benefit is higher on cash, than RSU.

No, you can't.

The number of people in this thread who don't understand RSU grants at all is kind of shocking.

You're granted $800k of RSUs up front at the current stock price, 25% percent vests every year. That is VERY different than buying 200k of stock every year because the 800k is all granted at the INITIAL price, whereas buying 200k every year buys stock at the CURRENT price.

If you could take 200k cash every year and then time travel back to the start of the period with it and buy the stock, THAT would be equivalent to RSUs.

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

#116

Post by spaceywilly »

marcinzm wrote: post #110
spaceywilly wrote: post #96

Earlier quoted context omitted.

Couldn’t you use the 200k cash alternative to buy AAPL, theoretically, and end up in the same boat? And in that case you can also buy a mix of other stocks to diversify instead of having it all in one company. I’d take cash any day personally.

No, the future unvested RSUs increase in value with the stock price. Your cash comp doesn't. If you got cash then you'd have made $200k the first year, $200k the second and $200k the third. If you got RSUs then you'd have made $350k the first year, $660k the second and $800k the third.

No I would make 400k the first year. It’s cash as an alternative to the RSUs, not just deleting the RSU part entirely

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

#117

Post by kgwgk »

jayp wrote: post #54
Vvector wrote: post #47

Earlier quoted context omitted.

Stock Grants are not an "expense" under Generally Accepted Accounting Principles. So by paying in stock, instead of salary, it increases profits on paper. It does help with cash flow and other tangible benefits. Most employees would be wise to divest much of their company stock as soon as they are allowed. Don't have all your eggs in one basket.

Is this really true?

No.

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

#118

Post by marcinzm »

spaceywilly wrote: post #116
marcinzm wrote: post #110

Earlier quoted context omitted.

No, the future unvested RSUs increase in value with the stock price. Your cash comp doesn't. If you got cash then you'd have made $200k the first year, $200k the second and $200k the third. If you got RSUs then you'd have made $350k the first year, $660k the second and $800k the third.

No I would make 400k the first year. It’s cash as an alternative to the RSUs, not just deleting the RSU part entirely

That wasn't the example I gave to simplify things but sure if you want that then:

If you got cash then you'd have made $400k the first year, $400k the second and $400k the third.

If you got RSUs then you'd have made $550k the first year, $860k the second and $1000k the third.

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

#119

Post by 3bproblem »

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…

Stripe does this, and Coinbase's move to annual equity grants also has a similar effect. There are a lot of tradeoffs in all directions, but the fundamental one is that the reduction in risk naturally carries an equivalent reduction in ability to participate on the upside (eg table at the bottom here: https://www.aeqium.com/post/a-survey-of-equity-refresh-progr...).

You can also argue that it's not good for employees, because downside is capped (stock goes to $0, you keep your salary) but upside is unlimited (Shopify becomes the next Microsoft, you're still driving a Kia).

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

#120

Post by cortesoft »

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.

It depends on what stage your company is, but the vast majority of start ups fail… so for most people at startups, cash is going to be much more reliable. I worked at two startups prior to my current job that both went out of business. I had a few opportunities to take more equity or cash, and I’m glad I took cash every time. I would have gotten zero if I took the equity.
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