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Uber plays hardball with early shareholders

fortune.com

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Re: Uber plays hardball with early shareholders

#91

Post by potatolicious »

UweSchmidt wrote: post #46
gohrt wrote: post #14

Earlier quoted context omitted.

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.

How so?

Investors put money into a company. Company uses money to pay workers. Everyone goes home happy.

We're already there, only newbies and people who don't know any better are taking a discount on market salary for options. The bulk of the people I know who work at startups are demanding - and getting - market salaries, and the options are of negligible importance.

Re: Uber plays hardball with early shareholders

#92

Post by opendais »

danielweber wrote: post #86
opendais wrote: post #85

Earlier quoted context omitted.

It wasn't a noncompete. It was an invention agreement.

Was it something like "we own your inventions while you work for us, and a year after you stop working for us"? I've gotten that clause myself in an employee agreement. The company wanted me to sign and they said their lawyers "wouldn't let them" change it.

Basically, yes.

He should have tried [or not done what he did]. However, he made a mistake and paid for it.

Re: Uber plays hardball with early shareholders

#93

Post by wpietri »

dsl wrote: post #71
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…

And it's doubly unfair to restrict the stock so that you can buy it back and then flip it for a much higher price. There might be legitimate reasons to control stock shares, but "so you can screw the people who backed you when nobody else would" is definitely not one of them.

Re: Uber plays hardball with early shareholders

#94

Post by wpietri »

jstalin wrote: post #28

Not sure why this is news. Virtually every privately-held corporation or LLC has a stock transfer restriction. Any company that doesn't is an outlier.

The news to me is that they are using the restriction to buy stock cheap and sell it dear, screwing their early supporters out of the difference.

Re: Uber plays hardball with early shareholders

#95

Post by wpietri »

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)?

You can definitely pay a lawyer to explain this stuff to you. Make sure to pick one who has regular experience with startups and equity. Because a) you don't want to pay 'em to learn it, b) they'll need current experience to tell you what "normal" looks like, and c) if things go south, it's good to have an established relationship with a lawyer who regularly works in the field.

The (awesome) lawyer I've used for years is Adam Slote of Slote, Links, and Boreman: http://www.slotelaw.com/

But I'd encourage you to do your research first, so that you aren't paying a lot of money to be spoon-fed stuff you could get from Wikipedia and elsewhere. I'd start here:

http://www.payne.org/index.php/Startup_Equity_For_Employees

https://avc.com/2012/04/mba-mondays-live-employee-equity-arc...

Re: Uber plays hardball with early shareholders

#96

Post by tptacek »

oh_sigh wrote: post #66
pjc50 wrote: post #27

Earlier quoted context omitted.

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 .

You're probably thinking of the Zynga execs forcing stock buybacks because they didn't want any "Google Chef" millionaires.

Not wanting to turn your secretaries, groundskeepers, cooks, and security guards into millionaires is a mindset I have a hard time understanding. Isn't that the very measure of a breakout success?

Re: Uber plays hardball with early shareholders

#97

Post by robbiemitchell »

boucher wrote: post #48
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.

Ah, I think I meant right of first offer/negotiation. Similar to real-estate arrangements in NYC.

Re: Uber plays hardball with early shareholders

#98

Post by youngtaff »

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…

But this is completely backwards…

It's not the companys equity, its the shareholders equity - a company is owned by it's shareholders not the other way around.

It the same sort of issue thats allowed management teams in large listed companies to just do what they want even when it's not in shareholders interest - compare the compensation packages of many boards with the return they make for shareholders.

Re: Uber plays hardball with early shareholders

#99

Post by youngtaff »

wpietri wrote: post #93
dsl wrote: post #71

Earlier quoted context omitted.

> 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…

And it's doubly unfair to restrict the stock so that you can buy it back and then flip it for a much higher price. There might be legitimate reasons to control stock shares, but "so you can screw the people who backed you when nobody else would" is definitely not one of them.

Racketeering?

Re: Uber plays hardball with early shareholders

#100

Post by chermanowicz »

paul wrote: post #82
dsl wrote: post #71

Earlier quoted context omitted.

> 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…

I agree that it needs to be clearly communicated (and perhaps they did not do that in this case), but there's no reason why equity must be liquid. I certainly have no expectations of immediate liquidity in my startup investments. Voting is a non-issue. Assuming things are structured right, the founders should retain majority control. The investment is primarily an investment in their vision, not something to be micro…

"there's no reason why equity must be liquid"

There's also no reason why equity must be illiquid -- or skewed to benefit a company more than the employees that built it. There are ways for people who received equity as compensation to take a little out on terms that are fair for everyone. Just because it's always been done a certain way is not a good justification for this position... after all, Uber is breaking the taxi business in a similar fashion.

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