...and this is why I choose to work at companies that issue STOCK not OPTIONS as part of my compensation.
Stripe faces $3.5B tax bill as employees' shares expire
211–220 of 396 posts
Re: Stripe faces $3.5B tax bill as employees' shares expire
#212Earlier quoted context omitted.
> 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.
I think I misread your comment, so I deleted my earlier one. Sorry. You’re right: if you’re going to work hard, you may as well choose the path with the highest rewards. If Stripe can’t make it worthwhile, is there a good reason to trade away what you’d get at FAANG? So the hard workers have a lucrative path (FAANG), and the ones who want to spend more time away from work have a more lucrative path (BigCo). That does…
First, for some people front loading their earnings is important so they can enjoy more of life. Second, as another thread goes into, the risk-adjusted picture of startup vs established tech company is quite different.
Re: Stripe faces $3.5B tax bill as employees' shares expire
#213Earlier quoted context omitted.
> 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.
I think I misread your comment, so I deleted my earlier one. Sorry. You’re right: if you’re going to work hard, you may as well choose the path with the highest rewards. If Stripe can’t make it worthwhile, is there a good reason to trade away what you’d get at FAANG? So the hard workers have a lucrative path (FAANG), and the ones who want to spend more time away from work have a more lucrative path (BigCo). That does…
FWIW I joined stripe at around 600 people and almost certainly will prove to have done much better there than at faang financially (and quality of life/work). N=1 but I expect the same is true of most people who've worked there even until recently.
Re: Stripe faces $3.5B tax bill as employees' shares expire
#214Earlier quoted context omitted.
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.
Some people love that kind of stress though.
Like some people like working hard so they can up front all their work and retire earlier.
And others like coasting so they can live their 20s before it’s gone.
Different strokes.
Re: Stripe faces $3.5B tax bill as employees' shares expire
#215(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
Former stripe employee here. This is not the case - early employees have been able to cash out on favorable (or at least reasonable) terms. Some limits, not perfect, etc, but I don't think that part of the narrative applies in this case.
Re: Stripe faces $3.5B tax bill as employees' shares expire
#216The 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?
Stripe doesn't want employees to sell stock to random third parties. This forces them to sell to a single buyer.
Re: Stripe faces $3.5B tax bill as employees' shares expire
#217Earlier 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.
Because receiving any kind of asset is a gain. For tax purposes an asset is valued at market or assessed rates depending on the type of asset (real estate, cars, stocks, etc.)
It’s tempting to think that we should just tax cash income, but that introduces tax avoidance incentives like being paid in assets instead of cash, unless it’s paired with a corporate income tax.
Re: Stripe faces $3.5B tax bill as employees' shares expire
#218Stripe was trading at $150 a share in the private market which valued it at ~$135B at some point. I think the investors who got in at $10B would be lucky to see a return.
My guess is founder/early employee stock has already exited as much as possible and notional value still on the books will be mostly wiped out
Stripe is a super paranoid company that knows it's valuation is tied to it's hype and they spend absurd $ on legal and "business intelligence" because the truth is they are really just a nicely documented API that any regulated entity can provide.
If/when they stop subsidizing their growth with investor $, Stripe common stock = 0
Re: Stripe faces $3.5B tax bill as employees' shares expire
#219(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…
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Re: Stripe faces $3.5B tax bill as employees' shares expire
#220Earlier quoted context omitted.
> for a paper gain of millions of dollars which is why this part should never have been taxed. Until there's a sale of those shares, the price is merely an estimate and thus is not and should not be considered the FMV.
A tax deferred is a tax avoided. I can take any financial gain and turn it into a "paper profit". So those have to be taxed. PS: I feel for these employees. My question is: Did they have the same access to the secondary market as the founder?
> I can take any financial gain and turn it into a "paper profit"
if you did, you would not have access to make use of those "paper profits" for consumption - it would remain an investment. This makes taxing it egregious imho.