231–240 of 282 posts
I would short this stock waiting for its implosion... So Many Sites are using shoppify when they basically sell no or one product per year...
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…
I thought Stripe moved to this compensation model last year
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“if” is the key word there. Most companies don’t make it to IPO, and even if they do it would be a long wait. In the mean time your shares are illiquid, the paper they are written on is worth more. I’d prefer to take the cash alternative and put it into safe investments.
AND there could be any number of rounds of funding before a successful Exit. It’s best to value the options at $0 and consider them a lottery ticket.
The company is very transparent with the numbers, though. Every month we have an all-hands meeting and the CEO goes over numbers, including current ARR, burn rate, balance, and runway.
We received a $75M Series C in May, and in our last fiscal year we 4X'd our ARR. We're doing pretty well.
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…
> You neither benefit significantly nor lose significantly as the stock moves around. I've never in my life seen an equity plan like it, and that's not a comment on whether it's good or bad, just that it's unusual. I thought Stripe moved to this compensation model last year
Say you get an offer with $100k in RSUs. That’s then divided by the stock price and that’s your initial grant. It vests in one year. After that you would do the same math again, except this time 1/4th vests quarterly.
It has pros and cons. It works well in challenging macroeconomic environments for the reasons others have mentioned.
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This is foolish. When public companies give stock to their employees, they dilute the stock as much as if they issued stock and sold it. So the cost of that compensation is the same as if it were in cash. If everyone knows that say, Netflix's stock price is guaranteed to go up 20% a year for the next 5 years, then the market price of that stock would suddenly jump up to the point where it no longer makes excess retur…
Specifically regarding your second paragraph: I think you’re overlooking the market’s ability to value tech stock. If everyone knows Netflix is gonna jump 20% a year for the next 5 years then everyone would dump their entire savings, take the penalty and reinvest their IRAs even, into Netflix. Why doesn’t this happen?
That's my point. There are times at which people think this is what it's going to do, and after it's done it lots of people believe it to have been clear in hindsight. But the situation where people know in advance for sure that there will be huge excess returns never occurs.
Netflix is a great example. Would you have been keen to take a large amount of income deferred and in stock at the point when streaming was just a weird perk bundled with the DVD mailing subscription?
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This is foolish. When public companies give stock to their employees, they dilute the stock as much as if they issued stock and sold it. So the cost of that compensation is the same as if it were in cash. If everyone knows that say, Netflix's stock price is guaranteed to go up 20% a year for the next 5 years, then the market price of that stock would suddenly jump up to the point where it no longer makes excess retur…
> When public companies give stock to their employees, they dilute the stock as much as if they issued stock and sold it. So the cost of that compensation is the same as if it were in cash. Companies DO prefer to grant RSU instead of cash bonus, because it'll provide liquidity to their stock and make employees engaged with the company's performance. One of Netflix's benefit is they're cash heavy in their compensation…
Of course, the stock price might have gone down, but also it might not. Companies don't usually time buybacks right to buy stock cheaply.
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That is highly dependent on if the stock appreciates. I remember getting a stock grant at IBM in 2011. Let alone, OP's example is you get all cash equivalent of the full stock grant... not vesting part.
You made a bad bet. Many engineers optimize for high growth 4-year grants above all else.
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No, the downside exposure is limited because you can quit your job. You don't have to actually eat a stock drop loss by working for 4 years and vesting a loser, you can change to another job and reset your basis.
True, but there's an opportunity cost to having worked at Company X on the assumption that your RSUs would appreciate in value, when in fact they decreased and you could have worked at Company Y instead.
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So it's not an equity grant at all then. It's an employee stock purchase plan. You choose how much of your compensation buys stock and you get a small discount on the purchase price (called "bonus" in the article). That is exactly an ESPP.
An ESPP is directing earned cash into stock. You buy the stock at time of payment. This is directing equity into RSUs or ISOs at the open of the window. You will be subject to price fluctuations over the window, which you wouldn't be with an ESPP.
Share price 50, you get 100 shares as RSU grant, worth 5,000.
Share price 50, you get $5,000 in shares, that's 100 shares. Share price , you get 125 shares.