Shopify lets staff decide cash-stock pay mix as shares dive • Hacker News Board

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

#241

Post by arcticbull » Fri, Sep 16, 2022, 9:10 PM UTC

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.

Depends on your level and your geographical location but a staff engineer could vest anywhere from 300K-800K per year depending - more if you see some meaningful stock appreciation over time. Staff engineers are like top ~10% of a company's engineers. That number can go up significantly if you're a principal engineer.

200K seems pretty average for a senior engineer role (i.e. a 'terminal' role, not an up-or-out junior role) in the Bay Area on top of a 150-200K base.

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

#242

Post by travisjungroth » Fri, Sep 16, 2022, 9:14 PM UTC

tharkun__ wrote: post #228

marcinzm wrote: post #118

Earlier quoted context omitted.

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.

That assumes you just keep the cash. I think what they meant was: First year make 400k, buy 200k worth of something that is not just one egg basket. But because it's salary you do that every ~2 weeks so you end up with hopefully more than 200k by end of year already too. Continue example over the other 3 years. Yes the upside is smaller as I would assume the broader market part would return less in the upside case. T…

They asked if you could "end up in the same boat" by getting paid the same amount in cash as RSUs. You can't. There's a common misconception that RSUs are only more restrictive than cash, that if you got paid in cash you could just use the cash to buy the stock and end up in the same position. This is just not true.

RSUs have downsides. That was never in question in this thread (as much as people keep affirming it).

RSUs also have financial upside over the equivalent amount of cash. That's the thing people keep trying to explain but also seems to get brushed off.

$100k cash and $200k RSUs per year in a stock that increases by 10% each year: after 4 years I have $400k cash and $1.171mm in stock.

$100k cash and $200k cash given to me at the beginning of the year to buy the same stock for 4 years: $400k cash and $1.021mm in stock.

They're just not the same. RSUs have leverage. They have upside and downside.

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

#243

Post by marcinzm » Fri, Sep 16, 2022, 9:14 PM UTC

tharkun__ wrote: post #228

marcinzm wrote: post #118

Earlier quoted context omitted.

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.

That assumes you just keep the cash. I think what they meant was: First year make 400k, buy 200k worth of something that is not just one egg basket. But because it's salary you do that every ~2 weeks so you end up with hopefully more than 200k by end of year already too. Continue example over the other 3 years. Yes the upside is smaller as I would assume the broader market part would return less in the upside case. T…

You can also invest the RSUs that vest or keep them. In my example I assumed you cashed them out instantly and did not invest the resulting cash. So while the cash looks better with investments so do the RSUs.

That also means the risk of RSUs is also not as high as you paint it out since you don't keep them for 4 years. After the 1 year cliff you can sell them as they vest. So you're only risking future money rather than money you've already gotten. Unless the stock goes below the original stock price then you're still ahead. If it does then you either get a top up or find a new job.

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

#244

Post by arcticbull » Fri, Sep 16, 2022, 9:15 PM UTC

RHSeeger wrote: post #153

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…

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

RSUs have a $0 cost basis - these aren't options we're talking about. Yes it's technically a $600K downside risk but if you recognize anywhere close to that your company went bankrupt and that won't factor into the conversation since you won't have a job anymore.

This kind of up-front grant is a wonderful asymmetric bet. You get $600K skin in the game on day 1. If the stock goes up 20% you get a 20% gain on the whole amount before you even own it. If it goes down materially, you're welcome to quit - but more often what happens is actually the company issues a refresh grant to make up for it - since they don't want you to quit. If it goes back up you now have a ton more stock on the way back up.

You get to earn appreciation on the whole amount before you earn it so up to 4 years early. You have nothing of your own at risk except your time. Things go well, you can do amazingly well. If things go bad, you lost a year or two and you can wander down the street for another lotto ticket.

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

#245

Post by alex_young » Fri, Sep 16, 2022, 9:17 PM UTC

cyral wrote: post #231

Bombthecat wrote: post #147

I would short this stock waiting for its implosion... So Many Sites are using shoppify when they basically sell no or one product per year...

Considering it went from $1,600 or so to $300 (adjusted for split, as it is really $30), you may be a bit late for that

It still has a $40B market cap

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

#246

Post by doktorhladnjak » Fri, Sep 16, 2022, 9:17 PM UTC

sulam wrote: post #163

RHSeeger wrote: post #154

Earlier quoted context omitted.

> 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).

Shopify's plan is an oddity in the industry, normally one doesn't directly trade RSUs and base comp. Netflix has allowed for this (probably still does, but I haven't negotiated against a Netflix offer recently), but I don't know of any other significant examples. 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…

Netflix lets you take a fraction of your pay in long term options, not RSUs

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

#247

Post by marvin » Fri, Sep 16, 2022, 9:33 PM UTC

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 wonder what kind of collusion Europe is up to, with salaries at 50%-20% of those available in the US.

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

#248

Post by ska » Fri, Sep 16, 2022, 9:38 PM UTC

Sohcahtoa82 wrote: post #234

bombcar wrote: post #165

Earlier quoted context omitted.

AND there could be any number of rounds of funding before a successful Exit. It’s best to value the options at $0 and consider them a lottery ticket.

Oh yeah, it's a lotto ticket for sure. Even starting the job, I told my wife I was playing the startup lottery. She's fine with it since we have over 6 months of expenses in savings, and work in security, I won't have a hard time finding a new job if we went belly up. The company is very transparent with the numbers, though. Every month we have an all-hands meeting and the CEO goes over numbers, including current ARR…

The main thing to remember is that typically early stage options for an engineer will make you a bundle iff everyone else gets paid (often first).

When things go badly, or even just not well, it doesn't matter what your plan was or how transparent everything is - the founders/board may be staring down a choice between folding the company up or decimating the equity of everyone currently holding it. It's a pretty easy decision usually. The good ones will take it on the nose with everyone else, the others ... well they aren't taking the same hit.

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

#249

Post by tharkun__ » Fri, Sep 16, 2022, 10:07 PM UTC

travisjungroth wrote: post #242

tharkun__ wrote: post #228

Earlier quoted context omitted.

That assumes you just keep the cash. I think what they meant was: First year make 400k, buy 200k worth of something that is not just one egg basket. But because it's salary you do that every ~2 weeks so you end up with hopefully more than 200k by end of year already too. Continue example over the other 3 years. Yes the upside is smaller as I would assume the broader market part would return less in the upside case. T…

They asked if you could "end up in the same boat" by getting paid the same amount in cash as RSUs. You can't. There's a common misconception that RSUs are only more restrictive than cash, that if you got paid in cash you could just use the cash to buy the stock and end up in the same position. This is just not true. RSUs have downsides. That was never in question in this thread (as much as people keep affirming it).…

Fair enough on the exact same boat. Very unlikely given the companies that usually have RSUs in that value range. You would have to get RSUs in a company that is less likely to go up than what you could invest in with the cash.

For a less sky rockety company that still offers RSUs I would take my chances with the cash and actually ending up in a better boat.

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

#250

Post by akavi » Fri, Sep 16, 2022, 10:23 PM UTC

kodah wrote: post #239

MajimasEyepatch wrote: post #211

Earlier quoted context omitted.

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.

Anecdotally, I've never had RSUs depreciate to a point at which I metaphorically lose money for my efforts. This might happen at startups more often and megacorps less often.

Then this past year you've gotten lucky.

We were in an unprecedented bull run for tech stocks for a decade plus. No guarantee that continues. Markets are anti-inductive and past performance is no guarantee of future results.