Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

news.ycombinator.com

Post reply on HN
Print view View original

121–130 of 172 posts

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

#121

Post by pb7 »

lutorm wrote: post #120

I'm not understanding the situation. When I had RSUs as an employee, those grants were voided at separation. I only got to keep the RSUs that had vested before separation (which were then just common stock and that I had paid taxes on at vesting.) Are you saying your former employer let you keep your unvested RSUs which subsequently vested at the IPO? (I've never heard of anyone getting to keep their unvested grants…

It's double trigger vesting. You vest proportionally based on your length of employment but the company is private so you can't liquidate and then they fully vest (meaning you can sell what had vested by the end of your employment) again at IPO (+lock up period).

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

#122

Post by amalcon »

rwmj wrote: post #106
emilsedgh wrote: post #94

Earlier quoted context omitted.

How would you find good lawyers that have experience dealing with this stuff? I had to sign stuff like this and the lawyers I was sent to seemed they didn't really have much relevant experience and I'm deeply uncomfortable with their assessments given how confused they looked.

You can't just use your random family lawyer. You need one who specialises in corporate law, VCs, RSUs and so on. Who that will be depends entirely on your location. I know a company that does this in London, but that's no use at all to this poster.

Your random family lawyer, if they are any good, will refer you to a specialist they know for something like this. That's a decent way to find one.

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

#123

Post by Aurornis »

JumpCrisscross wrote: post #9

Most RSUs have a time and liquidity vesting. The latter triggers on IPO. If your company didn’t follow that convention, they went out of their way to screw you [1]. (RSUs are generally a worse deal than IPOs. They’re a great deal for companies, which is why Andreessen et al push them.) > current employees have access to a sell-to-cover option, while former employees are required to prepay in cash This is common. Cash…

These are ex-employees, so they’re not vesting anything any more. Vesting applies to your time at the company.

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

#124

Post by belter »

Ancalagon wrote: post #7
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…

Yet another reason working for most startups is a scam

Working for a Silicon Valley startup feels like those scenes in a con movie: You're the wide eyed bettor at the pool table, convinced you have a shot...Until you realize you've been playing against world-class hustlers.

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

#125

Post by JumpCrisscross »

Aurornis wrote: post #123
JumpCrisscross wrote: post #9

Most RSUs have a time and liquidity vesting. The latter triggers on IPO. If your company didn’t follow that convention, they went out of their way to screw you [1]. (RSUs are generally a worse deal than IPOs. They’re a great deal for companies, which is why Andreessen et al push them.) > current employees have access to a sell-to-cover option, while former employees are required to prepay in cash This is common. Cash…

These are ex-employees, so they’re not vesting anything any more. Vesting applies to your time at the company.

> These are ex-employees, so they’re not vesting anything any more

Vesting is the gradual accrual of ownership. Time-based vesting is based on time employed. Liquidity-based vesting typically instantly-vests the whole package on IPO. For an employee that means acceleration (whole package vests, irrespective of the time component) and conversion (RSU converts into equity). For an ex employee, it typically means just the latter (already time-vested RSUs turn into equity).

There are a lot of degrees of freedom with the above, which is partly why I believe RSUs are a scam next to options despite being pitched as being more downside resilient. (You aren’t being granted shares. You’re being granted a derivative that conditionally converts into shares.)

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

#126

Post by JumpCrisscross »

kelnos wrote: post #100
JumpCrisscross wrote: post #9

Most RSUs have a time and liquidity vesting. The latter triggers on IPO. If your company didn’t follow that convention, they went out of their way to screw you [1]. (RSUs are generally a worse deal than IPOs. They’re a great deal for companies, which is why Andreessen et al push them.) > current employees have access to a sell-to-cover option, while former employees are required to prepay in cash This is common. Cash…

That's not a cashless sale. The company sells enough of your vested shares to cover taxes. The withholding the company sends to the IRS comes from some retail investor on the public stock exchange who buys those shares, not from the company's bank account. There's no loan involved and no risk the company has to take on.

> That's not a cashless sale. The company sells enough of your vested shares to cover taxes.

That’s cashless cover. (Cashless exercise is the company “sells” shares to itself to cover exercise cost, which is typically strike plus withheld taxes.)

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

#127

Post by JumpCrisscross »

fragmede wrote: post #87
JumpCrisscross wrote: post #53

Earlier quoted context omitted.

You’re being intentionally obtuse. The source of the problem isn’t the lock-up agreement, which was negotiated independently of the RSUs. And the lock-up agreement is easily (and commonly) circumvented—the problem is intractable because it’s unrelated to the lock-up. (And pedantically, a 185-day lock-up is not common.)

Ehhh 180 days is 6 months is fairly standard.

Which is why 185 isn’t. (Lock-ups have also gone into and out of vogue. And again, this is a problem with the company’s treatment of withholding. The lock-up agreement could go away and OP would retain their problem.)

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

#129

Post by 52-6F-62 »

AbstractH24 wrote: post #75
arkadiyt wrote: post #73

Earlier quoted context omitted.

185 days before 3/15/2025 is 9/11/2024. There were these IPOs around that time (all Nasdaq) [1]: - 9/10: TDTH - 9/10: XCH - 9/12: GLXG - 9/12: FVN [1]: https://stockanalysis.com/ipos/2024/

Unless details were intentionally changed that narrows it down to two companies that are not US based, despite being traded on Nasdaq. The other two are a ETF and SPAC Worth noting, because many people seem to assume these folks are based in SV

Because other Sv tech companies some us have worked for have been equally and intentionally shady

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

#130

Post by PopAlongKid »

ryaniscool wrote: post #117
kelnos wrote: post #95

Earlier quoted context omitted.

> I bet that lawyer will tell you (if this is in California) that you just need to send a letter saying “cool guys, send the shares, I’ll worry about the taxes. I don’t consent to forfeiture.” Not sure about this. A random thing[0] I found says: "RSUs are considered supplemental income, and as such, the income you receive from them is subject to withholding taxes. The IRS requires a federal withholding rate of 22% fo…

I think this illustrates perfectly why they should talk to a lawyer. I read through the link you posted. They don't mention anything about sec. 83(b) elections. It's a common strategy to avoid paying taxes until the RSU's are liquidated. I know about it because my current employer structured the RSU's this way. Every ESOP and RSU plan I've ever participated in has been slightly different. Your link focuses on a very…

>They don't mention anything about sec. 83(b) elections

Perhaps because it is inapplicable. 83(b) election can only be used for property that has been transferred but not vested. (Having a lock-up period does not mean the property is unvested).

Post reply on HN