Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

bloomberg.com

Post reply on HN
Print view View original

91–100 of 396 posts

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

#91

Post by hahaxdxd123 »

abhv wrote: post #79
gkoberger wrote: post #67

Earlier quoted context omitted.

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...

Stripe charges 2.9% + 30c per transaction. From that, about 1.3% + 5c per tx go to interchange + assessment fees. This leaves about 1.6% + 25c for the payment processor. 14.3 on 816b is about 1.7% which is consistent. On 1T, that means about 17b in revenue. Lets assume they have 7000 employees (i've seen 6000-8000 in searches). As rough estimates, these SFO-based SWEs + knowledge workers cost 1m/yr on average (which…

Employees do not cost that much, not even in SF. There are also many employees in sales roles in non-SF locales.

Their revenue is probably more on the order of 5-10b - the vast majority of payments volume is from large customers which negotiate much better rates that 2.9%.

I know they're just barely not profitable, so rev of ~8b, and total OpEx (salaries + AWS + cost of sales, etc) being approximately 8b sounds right to me.

At 8b profit, with normal tech multiples, they would be closer to a 200b company!

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

#92

Post by mis1988 »

KptMarchewa wrote: post #72
throw3823423 wrote: post #48

Earlier quoted context omitted.

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 don't understand why there's tax on unrealized gains there.

Joys of the Alternative Minimum Tax. The difference between the exercise and the FMV counts towards your AMT income.

(Disclaimer: not advice of any kind)

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

#93

Post by xyzzyz »

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.

The employees can always exercise and quit even if they cannot sell it, this doesn’t do a lot for the brain drain. Instead, the main reason is that company wants to control who its shareholders are. They don’t want just any entity to be able to become a shareholder and by this virtue, acquire extra privileges and access.

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

#94

Post by chasebank »

abhv wrote: post #79
gkoberger wrote: post #67

Earlier quoted context omitted.

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...

Stripe charges 2.9% + 30c per transaction. From that, about 1.3% + 5c per tx go to interchange + assessment fees. This leaves about 1.6% + 25c for the payment processor. 14.3 on 816b is about 1.7% which is consistent. On 1T, that means about 17b in revenue. Lets assume they have 7000 employees (i've seen 6000-8000 in searches). As rough estimates, these SFO-based SWEs + knowledge workers cost 1m/yr on average (which…

Yes, but stripe is not the actual processor, correct? IIRC they use first data as their processor. Pretty sure there are only like 4-6 actual processors. Fiserv, Chasepaytec, first data, etc. I'm sure their actual revenue after interchange and processor fees is much less than this.

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

#95

Post by yibg »

yieldcrv wrote: post #5
raylad wrote: post #3

I'm not following why there is a tax bill. If the stocks are founder stock or RSU, then the employee should have done an 83b election to avoid paying tax as they vest. If they are options, then the employee is under no obligation to exercise them, and owes no tax until they are exercised. What am I missing?

Very few people are in a position to pay for all their shares upon accepting a job. Which an 83b election entails. Change my view.

Depends on when. If you join when the shares are with $0.10 then exercising is not going to be costly on tech salaries.

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

#96

Post by yibg »

raylad wrote: post #3

I'm not following why there is a tax bill. If the stocks are founder stock or RSU, then the employee should have done an 83b election to avoid paying tax as they vest. If they are options, then the employee is under no obligation to exercise them, and owes no tax until they are exercised. What am I missing?

Only if you join early enough for the early exercise cost to be low. Anyone that joined after the first few years probably won’t be able to or want to pay the upfront cost for early exercising.

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

#97

Post by yibg »

yibg wrote: post #96
raylad wrote: post #3

I'm not following why there is a tax bill. If the stocks are founder stock or RSU, then the employee should have done an 83b election to avoid paying tax as they vest. If they are options, then the employee is under no obligation to exercise them, and owes no tax until they are exercised. What am I missing?

Only if you join early enough for the early exercise cost to be low. Anyone that joined after the first few years probably won’t be able to or want to pay the upfront cost for early exercising.

Also to clarify, RSUs are not exercised. They are yours when they vest and taxes are due when they vest (hence the double trigger)

Early startup employees are typically granted stock options. Stock options can be exercised, and the spread is taxed. Very early stage employees typically opt to do a 83b and early exercise. In this case the tax is due right then, but because the strike price is low and spread is nominally 0, the overall cost is low as well.

If you join later when your strike price is already high, it’s not financially viable for most to early exercise.

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

#98

Post by orangepurple »

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…

Can you work out a payment plan with the IRS for such a massive bill?

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

#99

Post by theIV »

xyzzyz wrote: post #90
valzam wrote: post #74

Earlier quoted context omitted.

The gains are realised, you just aren't getting cash but company stock. The 'gain' is the difference between option strike price and market value of the shares. Since stripe is privat the market value is a bit murky but that doesn't deter the IRS. EDIT: spelling

No, this is completely incorrect. The issue in question is about stock options, not stocks themselves. If you hold actual stocks, there is no tax bill until you sell these to realize the gains, and you can hold these forever. Instead, the issue at hand is about stock options . For those, the tax bill is due on exercise . For as long as you can hold the options without exercising, you don’t owe any tax, but the proble…

If they are ISOs, tax won't be due _upon_ exercise but will show up on that years tax return. Usually the AMT will hit you (if the exercise was worth it), and you'll owe the following year.

This is a slightly longer way of saying I'm not totally sure how what you're saying invalidates what valzam said: as far as the IRS is concerned, you did realize gains (you got something of value), just not on anything "liquid," hence AMT. Perhaps they (IRS) use different terms, but that's basically what's happening.

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

#100

Post by akavi »

nrmitchi wrote: post #89
choppaface wrote: post #87

Earlier quoted context omitted.

At Uber, employees got loans to cover exercise. Is that not happening here?

Taking out 7-8 figure loans to exercise start-up options in a private company in a time of decreasing valuations and market uncertainty sounds like a pretty poor idea.

You can get loans backed by the shares themselves. Ie, the lender gets x% of the shares, rather than being paid back a specific dollar amount at a later time.
Post reply on HN