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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

#211

Post by MajimasEyepatch »

MichaelBurge wrote: post #168
RHSeeger wrote: post #153

Earlier quoted context omitted.

> That's an extra 600k of upside exposure. It's also an extra 600k of downside exposure.

No, the downside exposure is limited because you can quit your job. You don't have to actually eat a stock drop loss by working for 4 years and vesting a loser, you can change to another job and reset your basis.

True, but there's an opportunity cost to having worked at Company X on the assumption that your RSUs would appreciate in value, when in fact they decreased and you could have worked at Company Y instead.

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

#212

Post by adventured »

ghaff wrote: post #192
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.

Look at how a lot of valuations dropped during dot-bomb. 50% is nothing.

I agree with your point, however there has been plenty of 70-80% (or worse) destruction as well.

Fiverr -88%, Fastly -92%, Pinterest -72%, Zoom -87%, Shopify -82%, Roku -85%, DocuSign -82%, Twilio -84%, Virgin Galactic -91%, DraftKings -75%, Palantir -82%, Coinbase -80%, Robinhood -88%, Rivian -78%, Roblox -72%, Unity -83%, Nikola -94%, Peloton -94%, Snap -86%, Square/Block -73%, Zillow -84%, Teladoc -90%, UiPath -84%, Affirm -83%, SoFi -75%, DigitalOcean -70%, Asana -83%, Okta -80%

That's in the realm of a dotcom bubble style implosion. There are plenty of other prominent names to add to that list. Having lived through the dotcom destruction, this rhymes, even if it's not exactly the same.

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

#213

Post by BMorearty »

JAlexoid wrote: post #193
BMorearty wrote: post #56

Earlier quoted context omitted.

Replacing stock compensation with cash salary and bonus would be a terrible idea. Other industries should be moving toward employee ownership, not the other way around. Employee ownership creates shared incentives. Shared incentives create alignment. Alignment helps eliminate an antagonistic relationship between employees and management. Instead of them vs. us, it moves it more towards all us. Instead of the fat cats…

That's a load of BS. You're an employee, not a co-owner. You're paid to do a job and, more often than not, your input is completely irrelevant to the leadership. And as someone who is paid to do a job, not to be a practical co-owner, you should be paid in cash. I currently work at a 50 people startup... and guess what? I'm no co-owner, no matter how much options I get. Last reorganization was done without my input...…

You’d rather the tech industry work like industries where only founders and executives reap windfalls of exit events? If your reply is that the company can offer bonuses when the exit event happens, (1) most companies don’t do this after the fact but stock is a way to force it to happen and (2) this doesn’t help employees who stayed for many years but didn’t happen to be there at the moment of the exit.

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

#214

Post by darkwizard42 »

gpderetta wrote: post #135
everforward wrote: post #131

Earlier quoted context omitted.

Right, but the stocks start earning value immediately and cash bonuses do not. Assuming gains are even at 5% per year, and the bonus is $100k (because the math is easier): With RSU's, you get $400k 1.05^4 (4 years of compounded growth) With cash, assuming you immediately invest the money, you get $100k 1.05^4 + $100k 1.05^3 + $100k 1.05^2 + $100k *1.05 Running those numbers, the RSU's are worth $486,202 at the end an…

Yes, that's why I suggest you should buy calls on the day your grant would have been assigned if you think the stock will go up. Of course most people won't do it because is very risky. Yet getting RSUs has similar risk (or larger as you can lose more than the option premium). There might be US tax implications that I'm not familiar with of course.

You aren't allowed to do this in the US. Lot of regulations on your RSUs and when you can sell etc. including derivatives on your vested and unvested stock.

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

#215

Post by kgwgk »

pessimizer wrote: post #207
kgwgk wrote: post #149

Earlier quoted context omitted.

> 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?

Not when the discussion in this sub-thread was about the "tech sector". (And it's not obvious if the valuation of Shopify is "very low".)

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

#216

Post by twblalock »

mrguyorama wrote: post #210
twblalock wrote: post #81

Earlier quoted context omitted.

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.

I can only think of one, and it was an anti-poaching agreement from 2005 that the involved companies paid compensation for later. I haven’t seen any reason to believe that is still happening.

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

#217

Post by Thrymr »

shard wrote: post #206
medvezhenok wrote: post #150

Earlier quoted context omitted.

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 fun…

Not true, because the cash would be distributed over time (as increased salary or bonus) as well, not a lump sum up front available for investment.

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

#218

Post by leviathant »

pessimizer wrote: post #207
kgwgk wrote: post #149

Earlier quoted context omitted.

> 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?

Shopify's explosive stock growth always struck me as kind of scammy - or to be more charitable, the results of a very well targeted marketing campaign. It's back to where it should be - along the way, VTEX and BigCommerce jumped on the IPO train at exactly the wrong time. Everyone was sniffing their own farts in that sector for the last two years. Glad to see it come back down to earth.

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

#219

Post by joshl32532 »

wikfwikf wrote: post #121
twblalock wrote: post #44

Earlier quoted context omitted.

Why on earth would employers want to eliminate those massive returns? That's been an amazing tool for employee retention, especially for FAANG. If they reverted to paying cash plus bonus, they would be less competitive when hiring and retaining people. The companies that are changing this are the ones whose stock tanked, and they are worried that employees will leave because of it. Companies whose stock did not tank…

This is foolish. When public companies give stock to their employees, they dilute the stock as much as if they issued stock and sold it. So the cost of that compensation is the same as if it were in cash. If everyone knows that say, Netflix's stock price is guaranteed to go up 20% a year for the next 5 years, then the market price of that stock would suddenly jump up to the point where it no longer makes excess retur…

> When public companies give stock to their employees, they dilute the stock as much as if they issued stock and sold it. So the cost of that compensation is the same as if it were in cash.

Companies DO prefer to grant RSU instead of cash bonus, because it'll provide liquidity to their stock and make employees engaged with the company's performance. One of Netflix's benefit is they're cash heavy in their compensation, which SWE do prefer.

The dilution is not a problem, since they'll buyback stocks anyway.

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

#220

Post by gpderetta »

darkwizard42 wrote: post #214
gpderetta wrote: post #135

Earlier quoted context omitted.

Yes, that's why I suggest you should buy calls on the day your grant would have been assigned if you think the stock will go up. Of course most people won't do it because is very risky. Yet getting RSUs has similar risk (or larger as you can lose more than the option premium). There might be US tax implications that I'm not familiar with of course.

You aren't allowed to do this in the US. Lot of regulations on your RSUs and when you can sell etc. including derivatives on your vested and unvested stock.

We are talking about a scenario in which you get cash not RSU.

Also I'm not familiar with the US case, but I understand those limitations are contractual not regulatory and thus have no bearing in what's would be optimal for the employee.

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