Uber plays hardball with early shareholders • Hacker News Board

Re: Uber plays hardball with early shareholders

#71

Post by dsl » Fri, Jun 20, 2014, 6:23 PM UTC

paul wrote: post #67

Pre-ipo transfer restrictions are pretty normal. It never even occurred to me to try selling Google pre-ipo. It wasn't really a thing before secondmarket came along, and arguably trading on those markets is taking a company public without their consent. If I ever start another company, I would definitely have transfer restrictions. It's pretty important to control your equity, and I think the day-trading mentality is…

> It's pretty important to control your equity, and I think the day-trading mentality is toxic.

Equity is compensation. You can't tell your employees what to spend paychecks on, and you shouldn't be trying to block them from gaining liquidity. Maybe a doctor just told them they have a year to live, and won't be around for your planned 2019 IPO.

Unless you are granting them voting shares it is unfair to lock them into your vision of the company going forward, especially if they have departed.

Re: Uber plays hardball with early shareholders

#72

Post by danielweber » Fri, Jun 20, 2014, 6:24 PM UTC

paul wrote: post #67

Pre-ipo transfer restrictions are pretty normal. It never even occurred to me to try selling Google pre-ipo. It wasn't really a thing before secondmarket came along, and arguably trading on those markets is taking a company public without their consent. If I ever start another company, I would definitely have transfer restrictions. It's pretty important to control your equity, and I think the day-trading mentality is…

Transfer restrictions need to buy the stock at the offered price. If I have a good faith buyer willing to pay $200 per share, the company should offer $200.

I was a start-up where the board just decided to be as difficult as possible, just to be difficult, and said, "you will need to hire an auditor to review the books to come up with an accurate market value, and we will not cooperate with the auditor", not in those exact words. Which of course completely breaks the books of a minority shareholder in a moderately successful company.

Re: Uber plays hardball with early shareholders

#73

Post by Istof » Fri, Jun 20, 2014, 6:27 PM UTC

fiatmoney wrote: post #2

If you can't sell it, you don't really own it.

what would you say about the value if you can't sell it? 0?

Re: Uber plays hardball with early shareholders

#74

Post by danielweber » Fri, Jun 20, 2014, 6:28 PM UTC

pjc50 wrote: post #27

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…

never depend on it as part of your compensation in any way This is very true. I've been in the position of having worthless share options before. It's something everyone who's tempted to work 80 hour weeks because they have share options should remember. You should also remember the Google cook, who had $200m in options that the company tried to do him out of because he wasn't a developer .

If you don't have a seat in the board room, assume your options -- or even the stock you outright own -- is worth zero. They'll dilute you in a heartbeat. I once asked the CEO about how the current dilution round was going to affect people who had exercised and left the previous year, and was told that they were no longer moving the company forward.

Re: Uber plays hardball with early shareholders

#75

Post by alain94040 » Fri, Jun 20, 2014, 6:29 PM UTC

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)?

Don't spend money on a lawyer to ask about your company's stock options. Instead, sit down with HR when it's convenient, and ask them to explain to you the key terms.

How many shares am I getting? Roughly what percentage of the company does it represent? When do I need to pay for them? How much do they cost me? Do they expire at some point? Once I buy them, can I sell them?

That should cover most of what you need to know for now. Then read the paperwork and see if it matches mostly what you were told. Then forget about them and wait until something big happens at your company.

Re: Uber plays hardball with early shareholders

#76

Post by opendais » Fri, Jun 20, 2014, 6:30 PM UTC

potatolicious wrote: post #68

opendais wrote: post #64

Earlier quoted context omitted.

> A lot of those 11% are still "failures" for the employees though - IPOs almost always are positive for employees, but acquisitions are not. > My personal, unscientific ballpark is that the odds of exiting your options for at least the same amount as the original grant valuation is somewhere in the sub-1% range. Fair enough, but lets call it .5%. Maybe I was off a decimal place. ;) .5% of a chance at $200,000 is sti…

It's worth $1000 ;) Of course, the entire intent of options in startups is to convince you that it's worth much more than $1000. Best not be fooled.

Oh, I am sure. ;)

I just would go with my valuation of the total compensation, not theirs. Same as I would do selling/buying a car.

Re: Uber plays hardball with early shareholders

#77

Post by danielweber » Fri, Jun 20, 2014, 6:30 PM UTC

joezydeco wrote: post #3

"This fear of being viewed as a startup enemy also is why none of the early Uber investors we spoke with would allow us to publish their names." What is a "startup enemy" and how does wanting to recoup some of your investment make you one?

Will Phil Greenspun ever get VC funding again?

(I'm not a big fan of him, personally, but at least he let the rest of us see how incredibly offended VCs get when you don't roll over and play dead.)

Re: Uber plays hardball with early shareholders

#78

Post by dsl » Fri, Jun 20, 2014, 6:31 PM UTC

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?

The underwriter of an IPO goes around and sells your stock to their largest clients in advance (which is where the company gets its payout). They sell your stock at say 10% less than what they think it will settle at. All the pre-IPO buyers cash out within the first few hours of trading. Without a big enough "pop" your stock is considered to have been a bad investment by the underwriters and the pre-IPO buyers because they didn't see 10%+ one day returns.

IPOs are layers upon layers of scams and shady dealings.

Re: Uber plays hardball with early shareholders

#79

Post by danielweber » Fri, Jun 20, 2014, 6:31 PM UTC

opendais wrote: post #47

angersock wrote: post #35

Earlier quoted context omitted.

"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…

family friend who is an idiot and did something similar for stupid reasons [it turns out he signed paperwork he thought he never had

Was it a noncompete?

Re: Uber plays hardball with early shareholders

#80

Post by winterchil » Fri, Jun 20, 2014, 6:33 PM UTC

What hasn't been mentioned yet is that employees hold Common Stock, whereas the investors generally hold preferred stock. The preferred stock is worth more than the common stock because of special protections/provisions/voting rights/etc.

It's perfectly reasonable that the price would be lower on a buyback program. On the other hand controlling the equity is pretty important and it's not surprising they won't let it go to open market.

Welcome to the wonderful world of being a minority shareholder.