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

Uber plays hardball with early shareholders

fortune.com

Post reply on HN
Print view View original

11–20 of 100 posts

Re: Uber plays hardball with early shareholders

#11

Post by opendais »

skizm wrote: post #10
opendais wrote: post #6

Earlier quoted context omitted.

Yes, but they should pay market rates for the stock. The article made it sound like they were trying to buy it up at $4 billion evaluation when they knew they'd be auctioning some off for $10+ billion.

Is there any reason for them to pay more? I mean sure, it is a bit of a dick move but they seem like they aren't exactly trying to buy back the stock. They just don't want too many people selling. So either they get cheap stock or they block the sale. Win win for Uber, right?

It is an abuse of monopoly power in this situation to pay below market rates.

You don't screw people who had faith [investors; early employees with equity] in you. They shouldered a good deal of risk and you knifed them in the back by paying below market rates.

Re: Uber plays hardball with early shareholders

#12

Post by lmm »

couradical wrote: post #7
skizm wrote: post #4

Isn't there a law that if there are more than 500 shareholders for a private company that the company must go public? Sounds like a totally reasonable reason for keeping a tight hold on the stock.

There's no requirement to go "public" in the sense of listing on an exchange, and available for public purchase. What changes at that point is SEC regulatory compliance kicks in: earnings/revenue go public, SEC compliance paperwork has to be filed just like a public corp. That's really why people try to stay under that number - you have all the drawbacks of being public, except a floated share price, and it would eff…

Isn't an IPO pop bad for the company? It indicates that they priced too low, no?

Re: Uber plays hardball with early shareholders

#13

Post by free2rhyme214 »

throwoptions wrote: post #8

I'm in what might be a very similar position: I'm employed at a startup and was just given an option grant as a performance bonus. I believe I can't sell the stocks, and we're not really looking to go public, so I don't know what use they are or what any of it means. Is there a certain class of lawyer I can take my paperwork to and pay some fee for them to go over it and tell me what my options are (no pun intended)?

Yes there are lawyers who can help you however, options are essentially worthless unless the company goes public.

Option grants, employee benefits, bonuses...these are all carrot sticks employers use for employee retention. Bigger companies like Google can offer bus rides, better benefits, higher salary, etc. Make sense?

Re: Uber plays hardball with early shareholders

#14

Post by gohrt »

bickfordb wrote: post #5

It seems like reforms are needed to protect workers from predatory stock option contracts like these. Workers have almost no negotiating power in these cases, since they usually have common shares and no board voting power.

Ultimately, workers need to value the options properly: ~$0.

Interestingly, with options/RSUs clauses in employement contracts, workers are making "investments" in privately held securities on the order of ~$100K. In general (outside of employment contracts) such investments are not legal if the worker is not signed off as a "sophisticated investor".

I would like the SEC to close this loophole, by mandating some minimum disclosure requirements about the potential risks of options/RSUs, and barring employers from making misleading statements.

Re: Uber plays hardball with early shareholders

#15

Post by rickyc091 »

throwoptions wrote: post #8

I'm in what might be a very similar position: I'm employed at a startup and was just given an option grant as a performance bonus. I believe I can't sell the stocks, and we're not really looking to go public, so I don't know what use they are or what any of it means. Is there a certain class of lawyer I can take my paperwork to and pay some fee for them to go over it and tell me what my options are (no pun intended)?

Are you upset you received options instead of cash for your bonus? If so, you could have mentioned that you would take a salary raise instead of options. There really isn't much you can do with options until they go public or the company gets bought. You can also try to sell them on Secondary Market or SharesPost.

Re: Uber plays hardball with early shareholders

#16

Post by jeremymcanally »

It's amazing to me what companies will stick in these contracts, and how deep down the rabbit hole they'll stick it. It's their stock to do it with, of course, but it's just annoying that seemingly employee-centric companies will do such seemingly abusive things. For example, I've seen instances of sale restrictions being four contracts deep (e.g., "shall be governed by (x) agreement", and that agreement says "shall be bound by terms in (y)", and so on) in an agreement that employees were only ever officially given a draft version of but apparently still held as effective. It should have never been signed of course, but the obtuse nature and comforting language these things are couched in can be confusing.

At the same time, it's also unfortunate that people don't do research to look at other instruments for liquidity (like pre-paid forward transactions) that the restraining company has zero control over. In Uber's case though, it seems like they're actually paying on the up-and-up. Many companies intentionally deflate the fair market value of shares far, far below the actual valuation (like 1/25th the value paid by investors in the last round, for example), so offering to sell at what the investors paid in at is pretty decent.

Private equity is confusing and usually doesn't work in your favor. My general advice is to always appreciate it, but never depend on it as part of your compensation in any way (and Good Lord, don't bank your retirement on it!).

Re: Uber plays hardball with early shareholders

#17

Post by opendais »

gohrt wrote: post #14
bickfordb wrote: post #5

It seems like reforms are needed to protect workers from predatory stock option contracts like these. Workers have almost no negotiating power in these cases, since they usually have common shares and no board voting power.

Ultimately, workers need to value the options properly: ~$0. Interestingly, with options/RSUs clauses in employement contracts, workers are making "investments" in privately held securities on the order of ~$100K. In general (outside of employment contracts) such investments are not legal if the worker is not signed off as a "sophisticated investor". I would like the SEC to close this loophole, by mandating some mini…

I'd say the options are worth more like 5% of whatever their value is when you get them. They aren't worthless but it really is a high risk gamble that you are going to get value out of them.

Re: Uber plays hardball with early shareholders

#19

Post by throwoptions »

rickyc091 wrote: post #15
throwoptions wrote: post #8

I'm in what might be a very similar position: I'm employed at a startup and was just given an option grant as a performance bonus. I believe I can't sell the stocks, and we're not really looking to go public, so I don't know what use they are or what any of it means. Is there a certain class of lawyer I can take my paperwork to and pay some fee for them to go over it and tell me what my options are (no pun intended)?

Are you upset you received options instead of cash for your bonus? If so, you could have mentioned that you would take a salary raise instead of options. There really isn't much you can do with options until they go public or the company gets bought. You can also try to sell them on Secondary Market or SharesPost.

Oh, I'm not upset, I'm doing quite well otherwise, I've just been unable to find a law firm advertising anything related to what I'm looking for, which either means to me I need a specific type of lawyer to evaluate it or any ol' lawyer might work?

Re: Uber plays hardball with early shareholders

#20

Post by couradical »

lmm wrote: post #12
couradical wrote: post #7

Earlier quoted context omitted.

There's no requirement to go "public" in the sense of listing on an exchange, and available for public purchase. What changes at that point is SEC regulatory compliance kicks in: earnings/revenue go public, SEC compliance paperwork has to be filed just like a public corp. That's really why people try to stay under that number - you have all the drawbacks of being public, except a floated share price, and it would eff…

Isn't an IPO pop bad for the company? It indicates that they priced too low, no?

I think it's a fine line- I'm not in finance, but from what I understand you want some incentive to purchase a new issue as you have a set target of shares you're trying to move. I think that doubling in price is a bad thing, but I don't think movement of a few dollars per share is necessarily a bad thing.
Post reply on HN