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Shopify lets staff decide cash-stock pay mix as shares dive

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Re: Shopify lets staff decide cash-stock pay mix as shares dive

#151

Post by ska »

idontpost wrote: post #115
JAlexoid wrote: post #100

Earlier quoted context omitted.

Or you could get that cash and buy the same stock, without restrictions that come with RSUs. Oh... also... "Tax Man 22" - RSU grants are taxed at the time they vest. So if your 20000 RSUs vest at $100, then you pay regular income tax on $100... not lower capital gains tax on the $90 per RSU. Just the tax benefit is higher on cash, than RSU.

No, you can't. The number of people in this thread who don't understand RSU grants at all is kind of shocking. You're granted $800k of RSUs up front at the current stock price, 25% percent vests every year. That is VERY different than buying 200k of stock every year because the 800k is all granted at the INITIAL price, whereas buying 200k every year buys stock at the CURRENT price. If you could take 200k cash every y…

You are right that it is different, but it's not unambiguously better.

In the rather special case that stock price is monotonically increasing, there is an obvious benefit to locking in the earliest price you can.

On the other hand, if you have more cash every paycheck, you can trickle it into other potentially high growth companies and spread your risk. And you don't lose anything by leaving on a date you choose. And, as shopify has recently demonstrated, being locked into last years price could mean you lose a lot.

We've just left an extraordinary period of growth for tech stocks, but it won't always be that way.

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#152

Post by mym1990 »

duxup wrote: post #27
mabbo wrote: post #18

In no way do I speak for my employer, but on a personal level, this has been amazing for me and I'm so grateful the company did this. I'm very conservative about investing, and don't want to have a large amount of my portfolio tied up in the company I work for. I'm maxed out on cash (there's a minimum equity portion at my level) and my additional income goes into a broader portfolio of investments.

>don't want to have a large amount of my portfolio tied up in the company I work for. Just before the .com bust a company I worked for decided to remove the option for employees to just dump their 401k contributions into company stock, and removed the option to direct a massive % of their paycheck into the company stock purchase plan. (I believe some of these limits became law later on but at the time it was legal) S…

Isn't one benefit of these programs(from the employer side) that employees are more directly tied to company outcomes, and thus will put out better work/product? Of course one person won't shift the stock price, but as a collective, over time, it certainly would.

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#153

Post by RHSeeger »

modeless wrote: post #72
spaceywilly wrote: post #61

Earlier quoted context omitted.

If your company had offered you the cash value of RSUs instead of the RSUs, would you not have ended up in the same position financially? For example, if your base pay was 200k, and you had a grant of RSUs worth 200k, how is that better financially than getting all 400k in cash?

If you have RSUs worth 200k per year, standard practice is that you get one grant of 800k at the start of employment, vesting over four years. If you got 200k cash instead, you couldn't buy 800k stock in the first year. That's an extra 600k of upside exposure. If that 600k of extra stock appreciates a lot in the first few years, you are far better off with the RSU grant. If it doesn't, you can quit before it vests an…

> That's an extra 600k of upside exposure.

It's also an extra 600k of downside exposure.

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#154

Post by RHSeeger »

sulam wrote: post #141
ulfw wrote: post #107

Earlier quoted context omitted.

I don't know a single tech stock that has (significantly) appreciated over the last 12 months. I know a ton that depreciated by 2/3rds.

While I would avoid trying to time the market, anyone starting now has a much lower "cost basis" (they're not spending money, it's not a cost) and better chance at their RSUs appreciating while they vest. Using the last 12 months as a guide for the next 4 years isn't a reasonable way to analyze this.

> they're not spending money, it's not a cost

I'm not sure I follow that. If you're getting those shares instead of a higher salary, there's no effective difference between that and a cost you paid out of pocket (except for certain tax implications).

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#155

Post by [deleted] »

tensor wrote: post #28

One crucial thing not often talked about with this plan is that the stock is granted and vests quarterly . In fact, the amount of stock you get each quarter is also variable. E.g. if you choose to have 100k of equity each year, each quarter you get whatever amount of units equates to 25k of stock. So what they've done is nearly completely untie compensation from the stock price. You neither benefit significantly nor…

[deleted]

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#156

Post by lr4444lr »

neon_electro wrote: post #64
echelon wrote: post #48

Earlier quoted context omitted.

Startups will offer stock and win. If tech workers were united in fleeing giants to found or work at nimble upstarts, we would reap nearly all of the rewards.

Not when the best the nimble upstarts are offering in positions where equity is on the table are options, not shares. I’m all for more employee ownership and engagement from being a shareholder in addition to an employee, but I’d love to see startups equally interested in that.

I don't think you want this. Even in a firm that is under 10 mil., if you are granted hard equity, you're going to be liable for taxes on those shares, which will be extremely illiquid. Options or RSUs let you have your cake and eat it too, at a small price.

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#157

Post by AYBABTME »

breput wrote: post #137
AYBABTME wrote: post #86

Earlier quoted context omitted.

There's literally no advantage to hang onto them, versus selling them on vest day and reinvesting in a wide set of tech stocks (if that's what you want to invest into).

I generally agree with selling as soon as possible but there are some significant capital gains tax advantages for holding vested RSUs for a year. 15 to 20% vs. 32 to 37%.

Actually there isn't, other commenter explains why.

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#158

Post by RHSeeger »

marcinzm wrote: post #111
saagarjha wrote: post #90

Earlier quoted context omitted.

If you had $200k in yearly TWTR you’d make $100k this year. Things don’t always go up.

If you joined in 2019 then you'd make around $200k this year. Last year you'd have made around $350k. Still better or equal to getting cash every year.

So, the lottery is better than a savings account, because if you win the upside is much higher? Whether or not stocks options/rsus/whatever are worth more than an increase in salary is very dependent on the timing, the company, and variety of other things. You can just as easily point out losing situations as you can winning; in fact, I'd wager the losing is more common.

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#159

Post by akavi »

leoqa wrote: post #142
3bproblem wrote: post #119

Earlier quoted context omitted.

Stripe does this, and Coinbase's move to annual equity grants also has a similar effect. There are a lot of tradeoffs in all directions, but the fundamental one is that the reduction in risk naturally carries an equivalent reduction in ability to participate on the upside (eg table at the bottom here: https://www.aeqium.com/post/a-survey-of-equity-refresh-progr... ). You can also argue that it's not good for employee…

The reality is that RSUs are a better deal because of the unlimited upside. If my RSUs go to zero, I jump to another company and reset my cost basis- there is actually little risk here beyond the first year lock up.

That's effectively an implicit call option. You can buy an explicit version on the public market.

The question is "Is the cost of an explicit call option greater than the cost of finding a new job?"

There is some benefit in that with an explicit call option, you have to pay up front, while with job switching, you only incur the cost if the implicit option "expires worthless". But that's balanced by the fact that with the implicit option you're exposed to sector-wide risk (eg, see the current tech-wide turndown), while you're not with the explicit one.

Re: Shopify lets staff decide cash-stock pay mix as shares dive

#160

Post by [deleted] »

jayp wrote: post #54
Vvector wrote: post #47

Earlier quoted context omitted.

Stock Grants are not an "expense" under Generally Accepted Accounting Principles. So by paying in stock, instead of salary, it increases profits on paper. It does help with cash flow and other tangible benefits. Most employees would be wise to divest much of their company stock as soon as they are allowed. Don't have all your eggs in one basket.

Is this really true?

[deleted]
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