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

161–170 of 396 posts

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

#161

Post by nirvdrum »

valzam wrote: post #150
Apofis wrote: post #147

Earlier quoted context omitted.

What's realized about these gains if the company is blocking the sale of the stock on the secondary market? This is toilet paper these people were duped into thinking was worth something. Sounds more like a lawsuit.

Yes for sure it's a raw deal for the employees, but I think Stripe is planning to enable a secondary market? In any case, we are all adults, they accepted stock options as part of your renumeration. If they don't know the risks then don't work at a private company that offers stock options. EDIT: That being said, I think it would be reasonable to contemplate regulations that prevent private companies from blocking se…

To be fair, a venture-backed company remaining private for 10 years wasn't terribly common and probably wouldn't factor highly in anyone's risk assessment. If someone asked "what happens to these options in 10 years if you don't go public or get acquired?" they'd likely be ridiculed for being difficult. And I don't think start-ups want that to become the new mentality or they'll get more push-back on comp structure.

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

#162

Post by umeshunni »

SamvitJ wrote: post #160

> Winning Competitions > In the presentation, Stripe said it generated $14.3 billion in revenue as it processed $816 billion in payments volume last year. The company’s so-called transaction margin before losses — a measure of net revenue — rose to $3.17 billion, or 0.38% of total volume. That compares with 17 basis points for rival Adyen NV, according to the presentation. Does anyone else feel these numbers aren't a…

FWIW, Paypal's revenues are $25.37B/year and it has a market cap of $86B

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

#163

Post by danielmarkbruce »

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 the stock is given to you as income, you owe tax on the $$ value as though it was income. Ask anyone who works at Google or any of the big corps who give RSUs. The number of them that hit your account is always about 2/3 of the number which actually vested. The rest are withheld as taxes.

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

#164

Post by mavelikara »

valzam wrote: post #150
Apofis wrote: post #147

Earlier quoted context omitted.

What's realized about these gains if the company is blocking the sale of the stock on the secondary market? This is toilet paper these people were duped into thinking was worth something. Sounds more like a lawsuit.

Yes for sure it's a raw deal for the employees, but I think Stripe is planning to enable a secondary market? In any case, we are all adults, they accepted stock options as part of your renumeration. If they don't know the risks then don't work at a private company that offers stock options. EDIT: That being said, I think it would be reasonable to contemplate regulations that prevent private companies from blocking se…

> That being said, I think it would be reasonable to contemplate regulations that prevent private companies from blocking secondary market sales if they offer stock options/RSUs to employees.

Either that, or IRS not consider the exercise as taxable until those conditions imposed by the company preventing secondary sale are lifted.

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

#165

Post by xyzzyz »

danielmarkbruce wrote: post #163
xyzzyz wrote: post #90

Earlier quoted context omitted.

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 the stock is given to you as income, you owe tax on the $$ value as though it was income. Ask anyone who works at Google or any of the big corps who give RSUs. The number of them that hit your account is always about 2/3 of the number which actually vested. The rest are withheld as taxes.

Again, you are talking about stocks. Options work completely differently. Unlike with RSUs, you don’t owe any tax on options when they vest, only when you actually exercise. I know how RSUs works, I have actually worked at Google for a number of years. Instead, you should ask someone who works at an earlier stage company how options work.

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

#166

Post by acjohnson55 »

choppaface wrote: post #86
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…

Some start-ups will both help employees exercise 83b as well as even bonus them the amount to cover the strike. Then if an employee leaves, the non-vested shares are clawed back and the bonus is not returned. If Stripe did this, wouldn’t they have avoided much of the tax issues here? It seems they’re only able to raise in this case because of their strong valuation and success. Like, most companies either could not d…

Yeah, but they would have had to have spent a lot more cash upfront, both in the bonus amounts and the payroll taxes on those amounts. ISOs are pretty ideal for early stage companies because they are very cash efficient and very light on taxes pre-liquidity. They begin to get more complicated when the company has non-negligible value. But they're still alright as long as you don't get to the point where the options are expiring without liquidity. The real question is why has Stripe allowed this to happen?

I'm not sure what you mean with the performance-based comp to comment on that idea.

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

#167

Post by notyourwork »

sillysaurusx wrote: post #143
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…

Could anyone translate this into “The early employees will get wealthy from this” or “they’ll get slightly more than they would’ve gotten from getting a job at BigCo over 4 years”? My problem with equity grants is that everyone treats them like they’re so valuable, when in fact the EV is usually close to zero. That wouldn’t be so bad if the upside was really good, but dealing with nonsense like this makes them even l…

> of working very hard, instead of coasting

I work at a FAANG, not coasting and make a lot of money and have made a lot of money every year for nearly a decade. I'll continue to make a lot of money and not worry about whether my startup will or won't succeed.

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

#168

Post by ztratar »

umeshunni wrote: post #162
SamvitJ wrote: post #160

> Winning Competitions > In the presentation, Stripe said it generated $14.3 billion in revenue as it processed $816 billion in payments volume last year. The company’s so-called transaction margin before losses — a measure of net revenue — rose to $3.17 billion, or 0.38% of total volume. That compares with 17 basis points for rival Adyen NV, according to the presentation. Does anyone else feel these numbers aren't a…

FWIW, Paypal's revenues are $25.37B/year and it has a market cap of $86B

And those are measured in the same way Stripe measures the $14B number.

Granted, PayPal has a higher take rate than both Adyen and Stripe. But also much lower growth.

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

#169

Post by notyourwork »

samclearman wrote: post #116
KptMarchewa wrote: post #72

Earlier quoted context omitted.

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

Because the system is crazy, but it only affects early employees of successful startups so there's no political will to fix it.

Crazy isn't an explanation.

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

#170

Post by ztratar »

csomar wrote: post #127
chasebank wrote: post #94

Earlier quoted context omitted.

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.

Interesting username and subject you brought up. I looked up Fiserv first on the Internet and > Fiserv is also the owner of First Data, which connects 2 million ATMs through the STAR network. The plot is thickening...

Stripe moved off of First Data and become its own processor way back in 2019.
Post reply on HN