Stripe faces $3.5B tax bill as employees' shares expire • Hacker News Board

Re: Stripe faces $3.5B tax bill as employees' shares expire

#271

Post by fallingknife » Thu, Mar 09, 2023, 10:45 AM UTC

scarface74 wrote: post #234

dasil003 wrote: post #229

Earlier quoted context omitted.

Joining Stripe at 600 was not that kind of bet. It was significantly derisked by that point was really a question of how far that early momentum could carry them.

So isn’t it still risky since you can’t get access to your equity? My RSUs are deposited into my account every six months and I can sell and diversify them.

Eventually the tech market will turn around, and they will be able to IPO. Stripe is projected to turn a profit this year, so there is no runway, and they can wait as long as the want for the right time. So Stripe equity isn't that risky. For 95% of startups it would be, though.

Re: Stripe faces $3.5B tax bill as employees' shares expire

#272

Post by kgwgk » Thu, Mar 09, 2023, 10:51 AM UTC

tyre wrote: post #134

snotrockets wrote: post #126

Earlier quoted context omitted.

According to the story, Stripe has been compensating employees with double triggered RSUs

But not from ten years ago. Initially everyone was on options (ISOs) then moved to double trigger RSUs, around 2017 iirc

According to the story, Stripe's need to withhold billions in (employee's) taxes is related to (waiving the second trigger in) the double triggered RSUs it has been using to compensate them.

Re: Stripe faces $3.5B tax bill as employees' shares expire

#273

Post by zamnos » Thu, Mar 09, 2023, 10:51 AM UTC

syliconadder wrote: post #263

bboygravity wrote: post #228

Earlier quoted context omitted.

As a European I feel like both those concepts (big money jobs or big money startups) are a USA only concept. Anywhere else in the world that has those kinds of options? China maybe?

India also has jobs that pays a similar wage compared to the rest of the population. But these are more outliers than the norm. Europe doesn't seem to have that many options at upward mobility, even a salary of 80,000 euros seems paltry when compared to the housing crisis across board, inflation and the general lack of innovation when compared to the US or China.

On the other hand, an €80k salary also includes not going bankrupt if you dare get cancer or cost you $19k if you want to birth a baby, and also allows you to live in a place where there's decent public transportation so you don't need a car and all that stress if you don't want. It means not going $200k in debt to go to college. It means drug laws that are more aimed at harm reduction rather than moralizing. I'm sure there's others.

Re: Stripe faces $3.5B tax bill as employees' shares expire

#274

Post by snemvalts » Thu, Mar 09, 2023, 10:55 AM UTC

postalrat wrote: post #140

mertd wrote: post #78

Earlier quoted context omitted.

Good luck hiring or retaining anyone after that while Stripe is still private.

Thats a lot of money they don't need to pay that could be used to hire and retain people.

Stripe's compensation is notoriously option heavy, almost like it were a public company https://www.levels.fyi/companies/stripe/salaries/software-en...

Re: Stripe faces $3.5B tax bill as employees' shares expire

#275

Post by thomascarney » Thu, Mar 09, 2023, 10:55 AM UTC

messe wrote: post #246

wreath wrote: post #240

Earlier quoted context omitted.

You dont have free healthcare. You pay for it like tech employees in the US do and you probably get worse service. At least there is a chance in the US to make generational wealth for a middle class, but no way in hell in Europe.

> You dont have free healthcare If you’re going to use that sort of reasoning, then you don’t get free anything other than air. Yes, it’s paid for by taxes (or through insurance depending on country; yes we have cheap private insurance here). Thank you for bringing that to our attention, our feeble European brains were unable to deduce that on our own.

In Germany, my wife and I pay together about ~2,000 USD per month for public health insurance. It's not cheap!

Re: Stripe faces $3.5B tax bill as employees' shares expire

#276

Post by kgwgk » Thu, Mar 09, 2023, 10:55 AM UTC

xyzzyz wrote: post #165

danielmarkbruce wrote: post #163

Earlier quoted context omitted.

If the stock is given to you as income, you owe tax on the $$ value as though it was income. Ask anyone who works at Google or any of the big corps who give RSUs. The number of them that hit your account is always about 2/3 of the number which actually vested. The rest are withheld as taxes.

Again, you are talking about stocks. Options work completely differently. Unlike with RSUs, you don’t owe any tax on options when they vest, only when you actually exercise. I know how RSUs works, I have actually worked at Google for a number of years. Instead, you should ask someone who works at an earlier stage company how options work.

Note that the 3.5bn (withholding) tax under discussion is not about options. It's about RSUs.

(There is also a less important amount of tax due - by more ancient employees - which is about options.)

Re: Stripe faces $3.5B tax bill as employees' shares expire

#277

Post by zamnos » Thu, Mar 09, 2023, 11:01 AM UTC

Xcelerate wrote: post #242

choppaface wrote: post #193

Earlier quoted context omitted.

While it's true that cover-to-exercise is more cash-intensive, if it's only for the first 50 or so employees, it would seem viable for a company like Stripe that has strong cash flow. The problem with ISOs is they effectively halve the value of the award due to taxes, and furthermore can impose extremely risky tax situations on people who can't afford to lose much (e.g. employees who exercise before IPO). Performance…

> The problem with ISOs is they effectively halve the value of the award due to taxes Could you explain this?

Federal + California tax on those kinds of amounts totals 43%, which is easier to estimate in your head if you call it 50% after taxes.

Re: Stripe faces $3.5B tax bill as employees' shares expire

#278

Post by sverhagen » Thu, Mar 09, 2023, 11:02 AM UTC

madaxe_again wrote: post #230

nugget wrote: post #173

Earlier quoted context omitted.

Based on internal data I have from similar companies my guess would be the first 50 employees average about $15-20m each and the next 100 average about $5-10m each just from their initial 4 year grants, with a lot of variation based on team and seniority. Stripe options have probably grown about 100x in value since the Series B so if you were an engineer who joined around that time, received $100k in RSUs, and left u…

Based on personal experience and friends who have been at unicorns in their early days - the first 50 employees average about $0. The next 100 average about $0. In every case, the stock that the employees holds gets reclassified and diluted until it’s a funky employee-only stock that’s only saleable back to the company at nominal value, but the company isn’t buying. So sure, maybe there’s some kind of nominal value,…

Doesn't that mean these the decision makers also don't have liquidity? If so, wouldn't the lack of liquidity not be for them still believing that there's a bigger payday behind the horizon? Still sucks if you want/need the cash now, of course.

Re: Stripe faces $3.5B tax bill as employees' shares expire

#279

Post by sverhagen » Thu, Mar 09, 2023, 11:05 AM UTC

WJW wrote: post #268

oblio wrote: post #244

Earlier quoted context omitted.

True, but group A has a 1% (5%?) chance of achieving their goal while group B has a 80% (100%?) chance of achieving theirs. Always include the odds in these calculations :-)

Indeed. Apart from option A (work hard at startup, get rich if startup exits successfully) and option B (work less hard FAANG, get paid with very high likelihood), there are also at least option C (work hard at startup, get almost nothing because the startup fails) and option D (work less hard at FAANG, don't get paid). Option C is much more likely than option A, but option D is much less likely than option B (unless…

Or you'd never qualify for a FAANG, and startups are your only chance to riches...

Re: Stripe faces $3.5B tax bill as employees' shares expire

#280

Post by sverhagen » Thu, Mar 09, 2023, 11:10 AM UTC

lifty wrote: post #252

oblio wrote: post #245

Earlier quoted context omitted.

> And when you factor in the municipal bus network, a $40k salary at Klarna in Stockholm is basically the same as a $350k salary at Stripe in the US. Sorry, I'm European but this is just silly. There's no way $40k in Sweden buys you equivalent quality of life as $350k in the US, even when taking all the welfare state factors into account.

I think it was a joke.

Is it? The numbers may be pushed a bit to their respective limits, but with all the talk about cost of living in the Valley, $200k there may poorly approximate a similar quality of living as a sub-$100k salary does in a European city. Something about apples, oranges, and generalization.