161–170 of 282 posts
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But did the bubble already burst in tech? Valuations are very low right now. I don't think we're necessarily at the bottom yet, but I think the worst has already come to pass.
> Valuations are very low right now. Very low compared to what?
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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.
This is not my understanding at all. Share compensation is considered an expense because it reduces the value of the shares held by other shareholders. It's advantageous for cashflow but neutral vs cash on the income statement. Disclaimer: I am not an accountant, this is not financial or accounting advice. Disclosure: I work for Shopify, but this should not be taken as a statement about Shopify's accounting or financ…
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While I would avoid trying to time the market, anyone starting now has a much lower "cost basis" (they're not spending money, it's not a cost) and better chance at their RSUs appreciating while they vest. Using the last 12 months as a guide for the next 4 years isn't a reasonable way to analyze this.
> they're not spending money, it's not a cost I'm not sure I follow that. If you're getting those shares instead of a higher salary, there's no effective difference between that and a cost you paid out of pocket (except for certain tax implications).
That said, legally, even in the specific case of the Shopify plan, you aren't taking cash and spending it on Shopify stock. If you were, your tax situation would be more complicated.
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>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…
Isn't one benefit of these programs(from the employer side) that employees are more directly tied to company outcomes, and thus will put out better work/product? Of course one person won't shift the stock price, but as a collective, over time, it certainly would.
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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.
It’s best to value the options at $0 and consider them a lottery ticket.
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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.
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I don't know a single tech stock that has (significantly) appreciated over the last 12 months. I know a ton that depreciated by 2/3rds.
Which leaves the employee with less upside going forward, at which point they can switch companies and "start over" with an RSU grant that is at par. In this regard the initial grant has a bit of flavor of an option. You have the option to stay on the vesting schedule or change companies and start a new vesting schedule, but any losses on unvested amounts don't hit you if you switch.
I guess that's the monkey-paw side of "incentivizing the employees to make the company perform by giving them a stake in the upside"...
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If you have RSUs worth 200k per year, standard practice is that you get one grant of 800k at the start of employment, vesting over four years. If you got 200k cash instead, you couldn't buy 800k stock in the first year. That's an extra 600k of upside exposure. If that 600k of extra stock appreciates a lot in the first few years, you are far better off with the RSU grant. If it doesn't, you can quit before it vests an…
> That's an extra 600k of upside exposure. It's also an extra 600k of downside exposure.
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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.
This is not my understanding at all. Share compensation is considered an expense because it reduces the value of the shares held by other shareholders. It's advantageous for cashflow but neutral vs cash on the income statement. Disclaimer: I am not an accountant, this is not financial or accounting advice. Disclosure: I work for Shopify, but this should not be taken as a statement about Shopify's accounting or financ…
- The company may have to issue new stock for this. That's like a loan: some entity gives cash, in exchange for a piece of the pie. Not in the expense side of the ledger. This is where the value of the shares gets diluted, but I don't think that fluctuations in the value of stock go into the ledger Publicly traded stock fluctuates all the time; that can't be going into the books!
- If the entity is some body of the company itself which is buying the stock, in order to give it to employees, than that plausibly looks like an expense. Buying stock (in anything) would normally be recorded as an asset, I would think, but if the intent is to give it away, then it looks like an expense. Analogy: a laptop bought for company use would be an asset, but if it's intended to be ginve away as a door prize in a raffle, then it's an expense.
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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 y…
You are right that it is different, but it's not unambiguously better. In the rather special case that stock price is monotonically increasing, there is an obvious benefit to locking in the earliest price you can. On the other hand, if you have more cash every paycheck, you can trickle it into other potentially high growth companies and spread your risk. And you don't lose anything by leaving on a date you choose. An…
That's a separate issue from the common misconception in this thread that cash is the same as RSUs.
RSUs have more risk than cash, and more potential upside. They are unambiguously different.