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

bloomberg.com

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

#201

Post by Blackthorn »

Kukumber wrote: post #156
paxys wrote: post #47

The article title is mixing up two different problems, and I think that's what is causing all the confusion in this thread. 1. Stripe has to pay $3.5B in taxes. This is unrelated to employee stock. 2. Lots of long term employees have expiring options, and if they exercised them they would face a massive tax bill. To solve both 1 & 2 Strips is doing an additional raise of $2.3B from private investors which will (1) gi…

raising money only just to pay people's tax from people who want to cash out seems scammy

Letting the RSUs expire is even more scammy.

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

#202

Post by RandallBrown »

sopooneo wrote: post #197
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…

One thing I've never understood about this: why on earth aren't there financial products specifically for people in this situation? Especially around Silicon Valley? Bankish Corp floats you the tax bill at some mutually beneficial interest rate, and in return gets a signed repayment guarantee for when you can actually cash out?

That does exist. I was able to do that with options at my last job with Carta.

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

#203

Post by WA »

paxys wrote: post #47

The article title is mixing up two different problems, and I think that's what is causing all the confusion in this thread. 1. Stripe has to pay $3.5B in taxes. This is unrelated to employee stock. 2. Lots of long term employees have expiring options, and if they exercised them they would face a massive tax bill. To solve both 1 & 2 Strips is doing an additional raise of $2.3B from private investors which will (1) gi…

> 2. Lots of long term employees have expiring options, and if they exercised them they would face a massive tax bill.

They = the employees, right? But they also have massive gains, which they then could use to pay these taxes. What’s the problem, except that tax payments aren’t deferred into the future?

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

#204

Post by danielmarkbruce »

Kukumber wrote: post #156
paxys wrote: post #47

The article title is mixing up two different problems, and I think that's what is causing all the confusion in this thread. 1. Stripe has to pay $3.5B in taxes. This is unrelated to employee stock. 2. Lots of long term employees have expiring options, and if they exercised them they would face a massive tax bill. To solve both 1 & 2 Strips is doing an additional raise of $2.3B from private investors which will (1) gi…

raising money only just to pay people's tax from people who want to cash out seems scammy

Who is being scammed?

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

#205

Post by hardware2win »

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…

>f 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.

Why is this relevant.

Wouldnt they still be ahead?

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

#206

Post by danielmarkbruce »

nemothekid wrote: post #128
paxys wrote: post #60

Earlier quoted context omitted.

This article is literally about how a significant number of Stripe employees are going to become multi-millionaires overnight. Where is the "train wreck" exactly?

> multi-millionaires overnight 10 years is a strained definition of overnight

The vesting is a binary event in this case. It is overnight indeed.

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

#207

Post by ConcernedCoder »

hardware2win wrote: post #205
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…

>f 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. Why is this relevant. Wouldnt they still be ahead?

> Wouldnt they still be ahead?

on paper, yes, you'd be ahead, but owning stock doesn't equate to cash, you'd have to liquidate by selling... in the interim, you'd still owe the tax bill, even though you haven't sold yet, and for some without the means to pay that bill, it can be a problem.

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

#208

Post by mcherm »

sopooneo wrote: post #197
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…

One thing I've never understood about this: why on earth aren't there financial products specifically for people in this situation? Especially around Silicon Valley? Bankish Corp floats you the tax bill at some mutually beneficial interest rate, and in return gets a signed repayment guarantee for when you can actually cash out?

Well, it might be a good idea, but there is a lot of risk. There is, for example, a risk that the employees get utterly screwed and are never permitted to cash out.

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

#209

Post by Nifty3929 »

Kukumber wrote: post #156
paxys wrote: post #47

The article title is mixing up two different problems, and I think that's what is causing all the confusion in this thread. 1. Stripe has to pay $3.5B in taxes. This is unrelated to employee stock. 2. Lots of long term employees have expiring options, and if they exercised them they would face a massive tax bill. To solve both 1 & 2 Strips is doing an additional raise of $2.3B from private investors which will (1) gi…

raising money only just to pay people's tax from people who want to cash out seems scammy

It not people who want to cash out. Actually it’s people who can’t cash out otherwise, but will still have a huge tax bill if they exercise before the options expire. The only other choice for these employees would be to simply allow millions of Dollars (each) of options to expire.
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