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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

#201

Post by fennecfoxen »

cbm-vic-20 wrote: post #191
modeless wrote: post #72

Earlier quoted context omitted.

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…

> If you have RSUs worth 200k per year I am clearly working at the wrong company.

Clearly.

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

#202

Post by JAlexoid »

Sebguer wrote: post #19
its_bbq wrote: post #17

Earlier quoted context omitted.

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

People invest more in companies when interest rates are low, because shoving it into lower risk vehicles becomes less profitable / likely to beat inflation. As interest rates rise, the value of safer places to put your money, such as bonds, increases. This is the super simple version.

Also money market returns are significantly higher.

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

#203

Post by htrp »

trynewideas wrote: post #185

My experience is probably not relevant to the audience here, but having worked at startups largely in non-engineering support roles that got smaller or heavily diluted grants, I've lost about $3,000 on options in 10 years in tech. I paid in $17,500 at two places where I had vested any options, all ISOs, and cashed out ~$14,500: broke even on an IPO at $7,500 vested, and lost $3k of $10k after the company was sold for…

I think the answer is that for everybody who brags about the equity package there are 9 other people who don't talk about the underwater options or the losses they ended up taking

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

#204

Post by anm89 »

zibby8 wrote: post #68
mjr00 wrote: post #45

Earlier quoted context omitted.

For the tech sector it's really been more like the last 22 years. There hasn't been an extended downturn in US tech stock since the original dot-com bubble. The 2008 recession ended up being a 1-2 year blip. The COVID contraction was extremely brief. By comparison, if you invested in the NASDAQ in 1999/2000, you'd need to wait 12-14 years to break even. I don't have a crystal ball, of course, but to me things are loo…

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.

Companies that lose money have gone from trading at a multiple of infinity to earnings, all the way down to a multiple of infinity on earnings...

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

#205

Post by sokoloff »

paulmd wrote: post #167
sokoloff wrote: post #134

Earlier quoted context omitted.

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.

incentivizing productive employees (the ones with the most alternatives) to quit if the stock price (or the stock market generally) goes down is a hell of a side-effect when you put it like that. 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"...

That’s why a lot of companies will issue special grants to their highest performing/most critical employees if the shares drop a lot. That makes for a good “double dipping” if the shares recover.

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

#206

Post by shard »

medvezhenok wrote: post #150
ulfw wrote: post #108

Earlier quoted context omitted.

And when it halves (like it happened to most tech stock over the last year) you get $50K by year 1. If that doubles you finally get your 100K again by year 2.

I think the point is that RSUs are preferable if the stock goes up, and cash is preferable if the stock goes down. If the stock stays flat, there is no difference between RSU/cash split. I think most people's assumption that the market will go up over time so most people would prefer RSUs. How accurate that assumption is in the short-medium term remains to be seen.

To be more general, RSUs are preferable if the stock goes up higher relative to other investments that the grantee could have picked, and cash is preferable if the stock performs worse than other investments that the grantee could have picked. For example, if the stock rises but performs worse than an index fund, then the grantee would have been better served to have gotten cash and put it into a no-effort index fund. If the grantee has an aptitude for stock picking, the balance sways even more towards cash being preferable.

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

#207

Post by pessimizer »

kgwgk wrote: post #149
zibby8 wrote: post #68

Earlier quoted context omitted.

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?

In the specific case of Shopify, stock value is 20% of what it was a year ago, and 80% of what it was a month ago. Isn't that what's relevant?

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

#208

Post by htrp »

kgwgk wrote: post #129
gshulegaard wrote: post #85

Earlier quoted context omitted.

Not quite. In the short term, perhaps, but I think the original comment was alluding to the fact that RSUs as an "investment" vehicle can have long term returns far greater than others. Put another way, 200k in RSUs at an early stage company might be worth 100x or even more at IPO or acquisition years down the line. If you were to take that same 200k in cash and invest it in other ways you might be able to have the s…

> Put another way, 200k in RSUs at an early stage company might be worth 100x or even more at IPO or acquisition years down the line. If you were to take that same 200k in cash and invest it in other ways you might be able to have the same return, but it's unlikely. Identifying a company that is going to return 10000% is difficult. However, identifying a company that is going to return 10000% _and_ getting a job ther…

> Identifying a company that is going to return 10000% is difficult. However, identifying a company that is going to return 10000% _and_ getting a job there is also difficult.

If you can do the first part, you're already working on sand hill road.

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

#209

Post by zibby8 »

mjr00 wrote: post #179
zibby8 wrote: post #68

Earlier quoted context omitted.

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.

Nobody can predict the bottom, or how low things will go. But I disagree that valuations are very low. Frankly, many tech companies (Uber, Twitter, etc) are still unprofitable money-losing machines with high valuations because of their potential growth and expectations of future profitability. There's an argument these companies should be worth much, much less. For the past ~10 years in particular, investors haven't…

I agree with your general assessment of the economy, but those are all factors everyone knows.

The adjustment we saw earlier this year was going from “the economy is booming and interest rates will be 0 forever” to “interest rates are going to 4% and we’re going to have a recession.” That’s an absolutely massive adjustment in expectations and stock prices, especially of high growth tech companies, reflect that adjustment.

In order for valuations to drop substantially further, a similar expectation adjustment would need to happen. Something like “I thought we were going to have a recession but now it’s worse than the Great Depression”. Simply adjusting expectations from “minor recession” to “moderate recession” isn’t big enough to crater the markets like we saw earlier this year.

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

#210

Post by mrguyorama »

twblalock wrote: post #81
ericmay wrote: post #73

Earlier quoted context omitted.

If they all wink wink do it at the same time then it doesn’t matter.

Yeah but they aren't. And they won't. If there was collusion going on, compensation never would have skyrocketed over the past decade.

There have been multiple times in the past decade that FAANG colluded to decrease wages.
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