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Uber plays hardball with early shareholders

fortune.com

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Re: Uber plays hardball with early shareholders

#41

Post by sliverstorm »

RyJones wrote: post #25
opendais wrote: post #17

Earlier quoted context omitted.

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.

A lottery ticket with 5% odds of payoff would be phenomenal. I think $0 is the proper value - I've never worked for a startup that paid dollar one on options. Warning, if I work somewhere, you should short that stock / not take options. Sorry.

Does that ever get depressing? Like, "Well the last seven companies I worked for all went belly-up in a few years, I don't expect this one to last much longer..."

Re: Uber plays hardball with early shareholders

#42

Post by RyJones »

sliverstorm wrote: post #41
RyJones wrote: post #25

Earlier quoted context omitted.

A lottery ticket with 5% odds of payoff would be phenomenal. I think $0 is the proper value - I've never worked for a startup that paid dollar one on options. Warning, if I work somewhere, you should short that stock / not take options. Sorry.

Does that ever get depressing? Like, "Well the last seven companies I worked for all went belly-up in a few years, I don't expect this one to last much longer..."

If insanity is doing the same thing over and over, expecting different outcomes, I'm insane because I keep doing startups. It's all about the PMA

http://en.wikipedia.org/wiki/Positive_mental_attitude

Re: Uber plays hardball with early shareholders

#43

Post by Iftheshoefits »

mikeryan wrote: post #39
jeremymcanally wrote: post #16

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…

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!). If thats the case why would talented folks work for a startup? Go work for Facebook or Google...

People who work for startups under conditions like these do it for a variety of reasons that have little to do with compensation in the near or medium term (even if they mistakenly believe they are being compensated fairly).

Re: Uber plays hardball with early shareholders

#44

Post by lotp »

ganeumann wrote: post #34
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.

Not that I think Uber is handling this constructively, but there's a valid reason why they would not offer the valuation bandied about in the press: they are not buying the same equity as the $17 billion+ equity. The venture investors bought Preferred equity, the shares being sold by the employee are almost certainly Common equity. Common equity is worth less than Preferred equity. The times I have seen offers to buy…

"At the same time that it was restricting the aforementioned employee from selling, Uber also was preparing to raise new outside funding that ultimately would value the company at more than $18 billion."

Read carefully, this was prior to that round closing. Assumably they'd offer more now. (~5x)

Re: Uber plays hardball with early shareholders

#45

Post by UK-AL »

angersock wrote: post #35
opendais wrote: post #9

Earlier quoted context omitted.

If you got into a legal battle with your employer, there would be consequences to future employment. The same is true of investors. A legal battle with a company you invested in might close off access to future deals. Now, a reasonable person might evaluate the facts of the case if they have time...but not everyone has the time and/or would agree that they should sue Uber. It is alot like having worked on a porn site…

"If you got into a legal battle with your employer, there would be consequences to future employment." I mean, is this really the case though? Any reasonable employer I know of would say, "Oh, well, that's unfortunate, but your business", and move on. I think this repeated meme is just a good way to keep workers in their place.

It normally effects the first job you get after the legal battle.

However after the first job, nobody cares because you've proven yourself not to purposeful "trouble maker", and most likely makes the company look bad instead.

Markets are a fickle beast...

Re: Uber plays hardball with early shareholders

#46

Post by UweSchmidt »

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…

When we reach a point where all workers value options 0$, then the current startup system is dead.

Re: Uber plays hardball with early shareholders

#47

Post by opendais »

angersock wrote: post #35
opendais wrote: post #9

Earlier quoted context omitted.

If you got into a legal battle with your employer, there would be consequences to future employment. The same is true of investors. A legal battle with a company you invested in might close off access to future deals. Now, a reasonable person might evaluate the facts of the case if they have time...but not everyone has the time and/or would agree that they should sue Uber. It is alot like having worked on a porn site…

"If you got into a legal battle with your employer, there would be consequences to future employment." I mean, is this really the case though? Any reasonable employer I know of would say, "Oh, well, that's unfortunate, but your business", and move on. I think this repeated meme is just a good way to keep workers in their place.

I have an Aunt who is no longer able to find a job in the industry she originally worked due to a legal battle with someone who is well known and respected in that industry.

She has a job in a different industry now and makes significantly less [like 50%]. She doesn't think she'll be able to retire before 70 because of it.

Admittedly, the industry was very small and incestuous and it isn't like Tech where labor holds alot of power at present.

I also have a family friend who is an idiot and did something similar for stupid reasons [it turns out he signed paperwork he thought he never had, didn't keep copies]. He ended up in a government job eventually but he spent a couple years on welfare because he didn't believe my parents when they told him no one would hire him.

It really has an impact, at least anecdotal. It is possible I'm unusual in having close relationships with 2 people who had this happen and its much rarer in the general population.

Re: Uber plays hardball with early shareholders

#48

Post by boucher »

robbiemitchell wrote: post #29

What a non-story. This is a typical way for a private company to manage who owns its stock -- namely investors, employees, and former employees. It's basically a right of first refusal. You sell your options back to the company at the current market rate -- the rate at which that most recent investors purchased equity. That's your liquidity. The company will do this because it believes the options are undervalued com…

A right of first refusal is usually the right to buy at the same price as a third party has offered, not at some other price determined by the company.

Re: Uber plays hardball with early shareholders

#49

Post by rahimnathwani »

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)?

It might be worth paying a lawyer for advice specific to your situation, but sometimes people pay lawyer (or consulting) rates for what is generic information about a particular topic.

In the case of stock options, you may want to do some preparation so you know what questions you need to ask:

1. Read the paperwork to get a general sense of what you have been given. Make a bullet point summary of the rights (exercise date, price) and obligations (e.g. deadlines for exercise, or what happens if you leave).

2. Read a general introduction about stock options, like some of the content in 'Venture Deals' and/or the blog post that Alex wrote: http://blog.alexmaccaw.com/an-engineers-guide-to-stock-optio...

You will also want to understand the tax implications of the grant, as there may be things you need to do now, in order to minimize your tax liability.

IANAL but feel free to email me at the address in my profile

Re: Uber plays hardball with early shareholders

#50

Post by mikeryan »

Iftheshoefits wrote: post #43
mikeryan wrote: post #39

Earlier quoted context omitted.

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!). If thats the case why would talented folks work for a startup? Go work for Facebook or Google...

People who work for startups under conditions like these do it for a variety of reasons that have little to do with compensation in the near or medium term (even if they mistakenly believe they are being compensated fairly).

Yes but that long term compensation is pretty much entirely based around equity grants which the Parent poster is recommending never to depend on.
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