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

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

#331

Post by gadders »

mcherm wrote: post #208
sopooneo wrote: post #197

Earlier quoted context omitted.

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.

You can price risk. People buy distressed debt. No reason why they wouldn't buy illiquid private company stock (at a discount the holder might not like obviously).

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

#332

Post by thomascarney »

sgc wrote: post #329
ghaff wrote: post #318

Earlier quoted context omitted.

Which is about what a good family plan on the exchanges would be in the US.

Not good. Basically bankruptcy insurance, you pay for all your typical health expenses outside disaster. I don't know what Germany offers for that price, but given the overall lower cost of healthcare, presumably it actually covers your healthcare.

It's fairly good coverage without frills (i.e. you get a shared room in the hospital). Doctors tend to de-prioritize public insurance when giving appointments, because they earn less from them, particularly for elective or non-urgent issues, so you usually have to wait a bit longer than privately insured patients.

On the other hand, the insurance costs ~15% of income with a cap, so it has an element of solidarity to it - if you earn less, you pay less, and children and non-working spouse get covered without extra cost.

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

#333

Post by alasdair_ »

sverhagen wrote: post #280
lifty wrote: post #252

Earlier quoted context omitted.

I think it was a joke.

Is it? The numbers may be pushed a bit to their respective limits, but with all the talk about cost of living in the Valley, $200k there may poorly approximate a similar quality of living as a sub-$100k salary does in a European city. Something about apples, oranges, and generalization.

They are talking about how the municipal bus network makes up for a roughly 900% difference in two salary figures. It's definitely a joke.

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

#334

Post by alasdair_ »

vorpalhex wrote: post #157
sillysaurusx wrote: post #143

Earlier 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…

There are a whole bunch of conditionals here. If you excised your options as soon as you could (and constantly paid small amounts) then you own a good amount of shares.. but don't have anyone to sell to. I have heard that the average equity grant is ~40k of value. I suspect the median is in a very weird place towards the low end though, if that number is true to begin with. Options are complicated and timing is cruci…

>I have heard that the average equity grant is ~40k of value.

levels.fyi is pretty accurate. A staff engineer at Stripe gets around 260k base, 55k bonus and 360k in stock per year. I strongly doubt 40k is the average - $200k RSUs a year seems a lot more likely (unless they count commission-only sales people in the average, which would be weird).

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

#335

Post by alasdair_ »

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…

It's about double-trigger RSUs with a 7 year limit. Stripe is now in year six. If they wait any longer, the RSUs become worthless (and the employees riot).

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

#336

Post by scarface74 »

fallingknife wrote: post #271
scarface74 wrote: post #234

Earlier quoted context omitted.

So isn’t it still risky since you can’t get access to your equity? My RSUs are deposited into my account every six months and I can sell and diversify them.

Eventually the tech market will turn around, and they will be able to IPO. Stripe is projected to turn a profit this year, so there is no runway, and they can wait as long as the want for the right time. So Stripe equity isn't that risky. For 95% of startups it would be, though.

How does that help someone with financial needs now?

I’m not one of those people who keep my RSUs after they vest. I diversify over six months. I wouldn’t buy 30% of my company’s stock with cash if I were getting paid in cash , why would I keep my RSUs instead of diversify?

Of course that doesn’t mean I think the company I work for is going to disappear anytime soon.

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

#337

Post by antomeie »

That is such a confusing title... How I interpret the article is rather: "Stripe is raising $3.5B in order to buy-back shares from employees".

Which, if that is the case, really is just a re-distribution of money. Nothing is gained, nor lost.

But the article wants it to look like stripe is about to take a $3.5B tax loss...

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

#338

Post by ghaff »

thomascarney wrote: post #332
sgc wrote: post #329

Earlier quoted context omitted.

Not good. Basically bankruptcy insurance, you pay for all your typical health expenses outside disaster. I don't know what Germany offers for that price, but given the overall lower cost of healthcare, presumably it actually covers your healthcare.

It's fairly good coverage without frills (i.e. you get a shared room in the hospital). Doctors tend to de-prioritize public insurance when giving appointments, because they earn less from them, particularly for elective or non-urgent issues, so you usually have to wait a bit longer than privately insured patients. On the other hand, the insurance costs ~15% of income with a cap, so it has an element of solidarity to…

It's not public insurance though. It's private insurance companies on a given state's exchange which may be pretty similar to what you have through an employer. The big thing with Obamacare is that you can now get private insurance even with pre-conditions. I'm not going to especially defend health insurance in the US but the idea that you can only get it through an employer is just not true.

There's also Medicaid if you're poor of course.

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

#339

Post by hardware2win »

ConcernedCoder wrote: post #207
hardware2win wrote: post #205

Earlier quoted context omitted.

>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.

Cannot you receive stock and sell it on the next day?

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

#340

Post by KptMarchewa »

alxmng wrote: post #217
KptMarchewa wrote: post #72

Earlier quoted context omitted.

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.

>For tax purposes an asset is valued at market or assessed rates depending on the type of asset (real estate, cars, stocks, etc.)

If you can't sell them on a market (as the stocks are before IPO) they should not be taxed. At the very least, it's like that in Poland. Not that a lot of companies offer stock compensation here.

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