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Ask HN: Former employees' RSUs at risk after startup's IPO

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Re: Ask HN: Former employees' RSUs at risk after startup's IPO

#31

Post by greenspam »

danielmarkbruce wrote: post #22
greenspam wrote: post #18

Earlier quoted context omitted.

I commented with a correction. March 15, 2025 is 140 days from the IPO day. This is before the lockup periods ends and they require us to estimate our tax, based on the fair market value of that date, with the following formula, and pay cash, otherwise the vested RSU will be canceled: Number of vested RSUs * the estimated fair market value of the stock at the settlement date * the appliable highest marginal federal,…

They'll take your estimation ? Does it have to follow that formula?

If on that day, the market price is higher than my estimation, they would inform me and give me 1 day time to pay the difference. If the market price is lower, then I'll have to go through the tax return process with IRS.

Re: Ask HN: Former employees' RSUs at risk after startup's IPO

#32

Post by danielmarkbruce »

greenspam wrote: post #18
danielmarkbruce wrote: post #11

Earlier quoted context omitted.

The 185 day thing is fine. It's common. The company has likely made a legal commitment to not have any employees (past or present) sell for that time period. Look in the company's s-1, it will be there.

I commented with a correction. March 15, 2025 is 140 days from the IPO day. This is before the lockup periods ends and they require us to estimate our tax, based on the fair market value of that date, with the following formula, and pay cash, otherwise the vested RSU will be canceled: Number of vested RSUs * the estimated fair market value of the stock at the settlement date * the appliable highest marginal federal,…

anyway, mail me at username at googles service. Some chance I have an answer

Re: Ask HN: Former employees' RSUs at risk after startup's IPO

#33

Post by greenspam »

carlosdp wrote: post #8

Went through the Twilio IPO, I can give feedback based on my experience. IANAL and all that. 1. I've never heard of that from a tech company IPO. Twilio did sell-to-cover fwiw. 2. Does your RSU contract/letter say something about that? I'd maybe check with a lawyer and see if they can even do that. I would have imagined that in this scenario, the company gives you the RSUs and leaves you to figure out paying the IRS…

Thank you so much!

Re: Ask HN: Former employees' RSUs at risk after startup's IPO

#36

Post by bjtunfs »

feifan wrote: post #34

> The company has stated that if we do not prepay the taxes by March 15, 2025, the RSUs will be permanently forfeited Is it clear whether you'd forfeit your entire grant, or just some subset of shares that would correspond to a tax/withholding percentage?

all RSU forfeited.

Re: Ask HN: Former employees' RSUs at risk after startup's IPO

#37

Post by breakds »

danielmarkbruce wrote: post #25
JumpCrisscross wrote: post #19

Earlier quoted context omitted.

Borrow against the RSUs. If you have more than $500k, this should be trivial to privately arrange. (If less, idk. Also, not legal advice!)

yeah i was going to suggest the same... there are companies that do this, and honestly anyone with a little cash will lend you the money assuming the stock isn't a totally ridiculous thing. How are the RSUs managed? Are they in a brokerage account? You may well be able to borrow from the broker.

The shares are not in our brokerage account yet. According to the company, they need to confirm the tax payment to the company before the shares are transferred to the personal brokerage account.

Re: Ask HN: Former employees' RSUs at risk after startup's IPO

#38

Post by breakds »

jhj wrote: post #30

re #3, if your RSU windfall is substantially large, you might be eligible for the 100%/110% safe harbor that won't penalize you for tax underpayments (assuming you are a US taxpayer) e.g., you make $200K in 2024 and $5 million in 2025 (which includes the RSU windfall). Assuming you pay at least 110% of what you paid in taxes in 2024 in 2025, you need not pay estimated tax or anything beyond statutory withholding amou…

Thanks for mentioning the safe harbor rule. We are actually aware of that.

The issue here is that the company is asking the payment directly to the company's bank account, or the RSUs will be forfeited forever. This makes the situation much worse IMHO.

Re: Ask HN: Former employees' RSUs at risk after startup's IPO

#39

Post by andrewf »

greenspam wrote: post #15
andrewf wrote: post #13

On point 3 specifically: I work for a FAANG, and the employees need to nominate the percentage the company should sell-to-cover, they don't figure it out for you. If you're no longer employed by the company I don't know _how_ they'd figure it out. If RSUs are still W-2 income for a former employee (I don't know this?) it's the extra tax you'd pay on that much income - for me I estimate using the tax bracket it'll pul…

Right. Instead of the IPO date, or the end of the lockup date, they chose 3/15 as the date to settle the vested RSU. And require us to estimate our tax, based on the fair market value of that future date, with this formula, and pay cash, otherwise the vested RSU will be canceled: Number of vested RSUs * the estimated fair market value of the stock at the settlement date * the appliable highest marginal federal, state…

I'll add that, the original post says the vest date was in 2024 but the settlement date is in 2025. I'm a little surprised (but I'm not an expert!) that your taxable event is in 2025, rather than occurring on the vest date at that date's FMV. Generally the "vest" event is the point past which you have no (per some complicated definition) threat of forfeiture... but the company is threatening to forfeit the shares pending conditions...

In your shoes I'd be seeking an accountants' advice re: (1) do you already owe tax on these shares for tax year 2024? (2) if you don't take receipt of the shares for some process reason, might you still owe taxes on them?

Sorry you're going through this, I hope it's worth it in the end.

Re: Ask HN: Former employees' RSUs at risk after startup's IPO

#40

Post by hansonkd »

danielmarkbruce wrote: post #14
hansonkd wrote: post #6

> We are curious if this type of distinction between current and former employees is typical for post-IPO RSU settlements. I'm watching this thread, but just as a reminder that it benefits the company to be as vague and complicated as possible for ex-employees trying to exercise their equity rights. You and your equity are effectively dead weight to the company now and it's in their best interest to get you to forfei…

This is cynical and more frequently wrong that right. In most cases, the company is trying to avoid securities regulation screw ups, tax screw ups, other regulatory or legal screw ups. Sometimes they are overly conservative and it seems annoying, but that's what they are doing. As an example, Stripe went out of their way to get former employees paid.

> This is cynical and more frequently wrong that right

If you are joining a startup as an employee and expecting your equity to worth something its important to be aware of the risks. And trying to sell as an ex-employee is a Risk.

Maybe I'm a cynic but having worked in employee equity I have seen more times that companies essentially turn their back on ex-employees than i have seen them actively helping them on liquidity transactions like tender offers.

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