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Stripe faces $3.5B tax bill as employees' shares expire

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Re: Stripe faces $3.5B tax bill as employees' shares expire

#61

Post by akamia »

Swizec wrote: post #43
noahmbarr wrote: post #22

(Uninvolved growth-stage CFO perspective) The IRS mandates that stock option grants expire after 10 years. My best guess is these early employees are quickly approaching those grants' 10 year mark, and face an exercise or "lose it" situation. If you exercise, you have to pay the gain. For early employees, this could/would be a massive bill -- probably well into the 7-8 digit range for some early hires. Stripe seems t…

> to make sure early employees don't get rich before the IPO But why? What's wrong with early people getting wealthy?

The concern could be a brain drain. If lots of your early employees cash out and leave, you are potentially losing a lot of historical knowledge and expertise at a time when you are trying to build up to a successful IPO. Early employees often leave after an IPO. At that time, it is still disruptive but the company's priorities have changed.

Re: Stripe faces $3.5B tax bill as employees' shares expire

#62

Post by mrexroad »

dboreham wrote: post #45
Swizec wrote: post #43

Earlier quoted context omitted.

> to make sure early employees don't get rich before the IPO But why? What's wrong with early people getting wealthy?

Getting wealthy before VCs isn't good.

Gotta keep those workers hungry!

Re: Stripe faces $3.5B tax bill as employees' shares expire

#63

Post by braza »

raylad wrote: post #19
bzax wrote: post #10

Earlier quoted context omitted.

I don't know why you believe later employees get options. It is true that at public companies, employees often are compensated with options, but at "startup"s where the FMV of a new employee grant would be prohibitively expensive to either early exercise or pay income taxes on, employees get RSUs. Options are for small companies, and 83b elections when the exercise price can be paid by the employee upfront. RSU are f…

Someone here is confused, and it might be me. As I understand it: In a company where the fair market value share price is $1/share, if you get granted 100 options, you owe tax on $0 because options are not taxable. If you get granted 100 RSUs which are all fully vested, you owe tax on $100 because stocks are taxable. If the RSUs are 0% vested you don't owe any tax yet. Then, if the share price goes up to $2 a share,…

But one thing that I did not follow: in my experience most of the companies that offers RSUs are mostly public. I have been in some companies as Stripe and all of them gave options due to this exactly kind of issue.

Does someone has some rationale/speculation on why Stripe issued RSUs instead options?

Re: Stripe faces $3.5B tax bill as employees' shares expire

#64

Post by bombcar »

Swizec wrote: post #43
noahmbarr wrote: post #22

(Uninvolved growth-stage CFO perspective) The IRS mandates that stock option grants expire after 10 years. My best guess is these early employees are quickly approaching those grants' 10 year mark, and face an exercise or "lose it" situation. If you exercise, you have to pay the gain. For early employees, this could/would be a massive bill -- probably well into the 7-8 digit range for some early hires. Stripe seems t…

> to make sure early employees don't get rich before the IPO But why? What's wrong with early people getting wealthy?

Many employees leave the moment they can sell millions of dollars of stock.

Re: Stripe faces $3.5B tax bill as employees' shares expire

#65

Post by HDThoreaun »

Swizec wrote: post #43
noahmbarr wrote: post #22

(Uninvolved growth-stage CFO perspective) The IRS mandates that stock option grants expire after 10 years. My best guess is these early employees are quickly approaching those grants' 10 year mark, and face an exercise or "lose it" situation. If you exercise, you have to pay the gain. For early employees, this could/would be a massive bill -- probably well into the 7-8 digit range for some early hires. Stripe seems t…

> to make sure early employees don't get rich before the IPO But why? What's wrong with early people getting wealthy?

Probably a combo of wanting theme to stay instead of retiring and investors wanting to be able to offload their shares first in an IPO.

Re: Stripe faces $3.5B tax bill as employees' shares expire

#66

Post by rvnx »

The company brings only 127M USD / yr in fees.

To generate this income, they are losing money.

10M USD / month in income for a valuation of 95B USD sounds really insane (even at 50B USD valuation).

This could be the real reason why the employees are not so excited to purchase the shares even at a supposedly deep-discount @ 10B USD.

Re: Stripe faces $3.5B tax bill as employees' shares expire

#67

Post by gkoberger »

rvnx wrote: post #66

The company brings only 127M USD / yr in fees. To generate this income, they are losing money. 10M USD / month in income for a valuation of 95B USD sounds really insane (even at 50B USD valuation). This could be the real reason why the employees are not so excited to purchase the shares even at a supposedly deep-discount @ 10B USD.

Do you have a source on this? Nothing I could find is within an order of magnitude of your number.

Two weeks ago, Bloomberg said they process $1T in payment volume and expect to turn a profit this year. https://www.bloomberg.com/news/articles/2023-02-16/stripe-is...

Re: Stripe faces $3.5B tax bill as employees' shares expire

#68

Post by [deleted] »

rvnx wrote: post #66

The company brings only 127M USD / yr in fees. To generate this income, they are losing money. 10M USD / month in income for a valuation of 95B USD sounds really insane (even at 50B USD valuation). This could be the real reason why the employees are not so excited to purchase the shares even at a supposedly deep-discount @ 10B USD.

[deleted]

Re: Stripe faces $3.5B tax bill as employees' shares expire

#69

Post by Analemma_ »

akamia wrote: post #61
Swizec wrote: post #43

Earlier quoted context omitted.

> to make sure early employees don't get rich before the IPO But why? What's wrong with early people getting wealthy?

The concern could be a brain drain. If lots of your early employees cash out and leave, you are potentially losing a lot of historical knowledge and expertise at a time when you are trying to build up to a successful IPO. Early employees often leave after an IPO. At that time, it is still disruptive but the company's priorities have changed.

It's difficult to sympathize with Stripe when these options coming up on the ten-year mark, especially because we all know the reason it has been taking so long is that they would really like to just raise private capital forever instead of giving these employees their due.

Re: Stripe faces $3.5B tax bill as employees' shares expire

#70

Post by morepork »

throw3823423 wrote: post #48
noahmbarr wrote: post #22

(Uninvolved growth-stage CFO perspective) The IRS mandates that stock option grants expire after 10 years. My best guess is these early employees are quickly approaching those grants' 10 year mark, and face an exercise or "lose it" situation. If you exercise, you have to pay the gain. For early employees, this could/would be a massive bill -- probably well into the 7-8 digit range for some early hires. Stripe seems t…

It's pretty accurate: Employees don't have a few million in change, each, to turn the RSUs into plain stock. I don't think the issue is making employees wealthy or not: It's 10 year old RSUs, so most of them are owned by former employees. But consider the size: If the tax bill is 3.5B, the full size of the grants we are talking about here is over 10B! last valuations in the press are at something like 60b. So 1 in 6…

I wonder whether there could be space here for a bank to come in and specialise in loans to cover the tax bill, using the currently pre-IPO stock as security
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