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Why can't stripe let them expire, and then issue new grants to all affected employees with the same nominal value as the expired grants?
You're essentially suggesting discounting stock options: https://www.jdsupra.com/legalnews/section-409a-implications-...
Earlier quoted context omitted.
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.
For ex: Stripe has marked itself down ~50% over the last year. Suppose you think the haircut should be more like the 70% comps like SQ and PYPL have taken, and build that into the X%. Then on top of that loss buffer, you prudently demand an illiquidity premium and a profit margin. That arithmetic doesn't leave much room for the employee to retain any stock.
Why can't stripe let them expire, and then issue new grants to all affected employees with the same nominal value as the expired grants?
(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…
(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…
Why do people act like the tax's is greater than the cash flow, like it's some unthinkable crime to pay tax.
1. You exercise your options, for a paper gain of millions of dollars
2. However, you can't actually sell the shares (there are likely contractual restrictions on selling them, and even if not, there's not a liquid market)
3. So you have to pay millions of dollars of taxes even though your cash flow is zero.
And before you say "but they're ISOs", there's no such thing as ISO's under AMT so it doesn't help at all.
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.
(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…
> guessing Stripe has a blocking right on stock transfers Often there's right of first refusal, but blocking rights? Do they actually have that? Is this common? If so, (why) would they need right of first refusal?
What is the reason they give options instead of options? They want to reduce the amount of stock people own that no longer work at the company over time?
(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…
Why do people act like the tax's is greater than the cash flow, like it's some unthinkable crime to pay tax.
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…
This is wildly off, even for programmers. (Most knowledge workers are not programmers.) You're also conflating cash expenses with the equity-heavy compensation that makes tech employees expensive.
> Stripe charges 2.9% + 30c per transaction.
This is the baseline product. The resulting analysis is like analyzing Microsoft solely on the basis of Windows volumes and margins. (A great business, but not nearly as good as the real Microsoft!)
I would be surprised if the rest of their product suite (Invoicing, Billing, Radar, Identity, Tax, Capital, etc.) isn't generating a meaningful portion of their revenue (and a larger portion of their profit).
> multiple has dropped
Without high-level visibility into the relative revenue/profit contributions of their various products and their individual growth rates, it's hard to even guess at which numbers are driving investment multiples. Is this business more like Twilio, still trying to break from from the tyranny of COGS, or is it starting to look more like a pure SaaS a la Salesforce?