361–370 of 396 posts
Earlier quoted context omitted.
I don't understand why there's tax on unrealized gains there.
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
[flagged]
What is the "share of the upside" in terms of percentange?
Earlier quoted context omitted.
Cannot you receive stock and sell it on the next day?
No, the stock cannot be sold until stripe has an IPO. This is the bind employees are in. Together they have a 3.5 billion tax bill, but don't have the cash to pay it and cant sell the stock. It is like if I gave you a magic bean worth 1 billion this year, but the only magic bean buyer will come to town next year (hopefully). how will you pay your taxes.
(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?
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.
Earlier quoted context omitted.
No, the stock cannot be sold until stripe has an IPO. This is the bind employees are in. Together they have a 3.5 billion tax bill, but don't have the cash to pay it and cant sell the stock. It is like if I gave you a magic bean worth 1 billion this year, but the only magic bean buyer will come to town next year (hopefully). how will you pay your taxes.
Not entirely true. There's a grey area where you can sell futures of your own stock on the secondary market that can avoid requiring board approval.
I get why a buyback makes more sense here.
What I don't understand is why they didn't just let the current options expire and issue new ones with a fresh 10 year expiry, an IPO vesting trigger, and no employment contingency.
[flagged]
What happens when there's no liquidity event or insufficient to cover the loan? What is the "share of the upside" in terms of percentange?
Upon a liquidity event, the employee needs to pay back the investment amount + certain percentage of their shares. If the total amount is lower than the investment amount, the payback amount is capped by the amount they received for their shares. Thus, the employee will never pay out of pocket.
Regarding the share %, that varies based on the demand by the investor community for the specific company, and the specific employee strike price.
Earlier quoted context omitted.
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.
And it's good to remember, that while RSUs are nice for the reasons you state, companies that give them out tend to pay a lower cash salary because of that, and if those stock prices go down, so does your TC, and it could be quite a big drop.
Earlier quoted context omitted.
The employees can always exercise and quit even if they cannot sell it, this doesn’t do a lot for the brain drain. Instead, the main reason is that company wants to control who its shareholders are. They don’t want just any entity to be able to become a shareholder and by this virtue, acquire extra privileges and access.
> Instead, the main reason is that company wants to control who its shareholders are. Why? > They don’t want just any entity to be able to become a shareholder and by this virtue, acquire extra privileges and access. They're early employees, why wouldn't they be rewarded? What makes a random person that just walked in with a wad of cash more deserving?
> They're early employees, why wouldn't they be rewarded? What makes a random person that just walked in with a wad of cash more deserving?
Not sure what you mean. The entire point is that people who run private companies often do not want random people/organizations to come in with a wad of cash and become shareholders, without people running the company having any say in it.
Earlier quoted context omitted.
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.
It doesn't, but if you accepted an offer where the base salary doesn't cover your financial needs, then that's on you. And it's good to remember, that while RSUs are nice for the reasons you state, companies that give them out tend to pay a lower cash salary because of that, and if those stock prices go down, so does your TC, and it could be quite a big drop.
I’ll know myself in a couple of months.
I’m in my 3rd year and my first full year of base + RSUs instead of base + 2 years prorated signing bonus + back heavy vesting schedule.
(Yeah I know, how do I say where I work without saying where I work)