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

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

#321

Post by [deleted] » Thu, Mar 09, 2023, 1:40 PM UTC

mcherm wrote: post #208

sopooneo wrote: post #197

Earlier quoted context omitted.

One thing I've never understood about this: why on earth aren't there financial products specifically for people in this situation? Especially around Silicon Valley? Bankish Corp floats you the tax bill at some mutually beneficial interest rate, and in return gets a signed repayment guarantee for when you can actually cash out?

Well, it might be a good idea, but there is a lot of risk. There is, for example, a risk that the employees get utterly screwed and are never permitted to cash out.

[deleted]

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

#322

Post by ranting-moth » Thu, Mar 09, 2023, 1:41 PM UTC

paxys wrote: post #47

The article title is mixing up two different problems, and I think that's what is causing all the confusion in this thread. 1. Stripe has to pay $3.5B in taxes. This is unrelated to employee stock. 2. Lots of long term employees have expiring options, and if they exercised them they would face a massive tax bill. To solve both 1 & 2 Strips is doing an additional raise of $2.3B from private investors which will (1) gi…

Isn't ordinary tax a "luxury" problem, as it's just a ratio of gains, so shouldn't be a surprise or a problem in the first place?

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

#323

Post by CalRobert » Thu, Mar 09, 2023, 1:52 PM 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.

I just spent 3 hours calling around every damn pediatrician in Ireland to have somebody, ANYBODY check my 3 year old daughter who hasn't grown in 5 months and is under the 1st percentile in height now. I am happy to pay them a lot of money to do so.

There IS No healthcare in this dump of a country. I am looking at flying to Barcelona to have her seen, and moving out of this dysfunction as soon as possible while I'm at it.

In Europe you don't go bankrupt on healthcare because you just die.

Yeah, yeah, anecdata, but right now I'm liking the "I get an appointment quickly and pay lots of money but that's OK because I earn lots of money" model more and more.

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

#324

Post by gbasin » Thu, Mar 09, 2023, 1:53 PM 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,…

At least in the US, this will only be true before a company goes public. After that point, the shares will all be freely salable and have the same value (except for a small premium for supervoting shares which some founders may retain).

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

#325

Post by kgwgk » Thu, Mar 09, 2023, 1:56 PM UTC

ranting-moth wrote: post #322

paxys wrote: post #47

The article title is mixing up two different problems, and I think that's what is causing all the confusion in this thread. 1. Stripe has to pay $3.5B in taxes. This is unrelated to employee stock. 2. Lots of long term employees have expiring options, and if they exercised them they would face a massive tax bill. To solve both 1 & 2 Strips is doing an additional raise of $2.3B from private investors which will (1) gi…

Isn't ordinary tax a "luxury" problem, as it's just a ratio of gains, so shouldn't be a surprise or a problem in the first place?

Problem #1 is not ordinary tax. It's indeed about employee's stock compensation and the withholding tax that the company sends to the IRS on behalf of the employees when giving the (net) amount of shares to them. The problem is that there is no market for those shares.

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

#326

Post by sgc » Thu, Mar 09, 2023, 2:02 PM UTC

jossclimb wrote: post #306

madaxe_again wrote: post #230

Earlier quoted context omitted.

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,…

Anyone reading this comment, know that this is the other end of the extreme to saying everyone does well. The truth is far more in the middle with many shades of grey.

Without data it is all just anecdotes. I don't know where the definitive data is to say it is white or black, or reasonable characterized as gray rather than a shade of one of the two extremes. IPO data is public of course, but not the pre-IPO contortions affecting the set up for that moment.

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

#327

Post by oblio » Thu, Mar 09, 2023, 2:09 PM UTC

xyzzyz wrote: post #93

akamia wrote: post #61

Earlier quoted context omitted.

The concern could be a brain drain. If lots of your early employees cash out and leave, you are potentially losing a lot of historical knowledge and expertise at a time when you are trying to build up to a successful IPO. Early employees often leave after an IPO. At that time, it is still disruptive but the company's priorities have changed.

The employees can always exercise and quit even if they cannot sell it, this doesn’t do a lot for the brain drain. Instead, the main reason is that company wants to control who its shareholders are. They don’t want just any entity to be able to become a shareholder and by this virtue, acquire extra privileges and access.

> Instead, the main reason is that company wants to control who its shareholders are.

Why?

> They don’t want just any entity to be able to become a shareholder and by this virtue, acquire extra privileges and access.

They're early employees, why wouldn't they be rewarded? What makes a random person that just walked in with a wad of cash more deserving?

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

#328

Post by Retric » Thu, Mar 09, 2023, 2:10 PM UTC

matthewowen wrote: post #309

gitfan86 wrote: post #296

Earlier quoted context omitted.

After the 2000 dotcom bubble equity for employees became a lottery. If you got really lucky your shares were priced at a 50k market cap and the company ended up only diluting those down by 50% and the company went public making your shares worth 800k. But now that situation is rare. The investors and founders and bankers ensure that they take the vast majority of the upside when going public. If you are joining a com…

I don’t really buy this, but that’s largely based on own fairly positive experience of stock compensation at private companies. I will say that I think these conversations tend to be a little distorted because people who have had positive experiences feel awkward about saying “i made $xxMM from employee stock” but people who haven’t seem comfortable saying “stock based compensation was worthless”. Also tbh a lot of p…

Sure people may not want to talk about it, but a big part of this is so few people make $xxMM from employee stock.

Yes, if you where one of the first 50 employees at Google you probably made low $xxMM, but it’s a long wait until IPO and the overwhelming majority of people at Google didn’t get anything close to that much. Worse the overwhelming majority of companies aren’t Google style success stories.

Also, don’t forget nobody at Stripe has gotten to cash out yet. Your looking for very early employees, at wildly successful startups, who started 10+ years ago, and are still poking around online forms, and willing to talk about it.

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

#329

Post by sgc » Thu, Mar 09, 2023, 2:14 PM UTC

ghaff wrote: post #318

thomascarney wrote: post #275

Earlier quoted context omitted.

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

Which is about what a good family plan on the exchanges would be in the US.

Not good. Basically bankruptcy insurance, you pay for all your typical health expenses outside disaster. I don't know what Germany offers for that price, but given the overall lower cost of healthcare, presumably it actually covers your healthcare.

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

#330

Post by marcus_holmes » Thu, Mar 09, 2023, 2:17 PM UTC

matthewowen wrote: post #309

gitfan86 wrote: post #296

Earlier quoted context omitted.

After the 2000 dotcom bubble equity for employees became a lottery. If you got really lucky your shares were priced at a 50k market cap and the company ended up only diluting those down by 50% and the company went public making your shares worth 800k. But now that situation is rare. The investors and founders and bankers ensure that they take the vast majority of the upside when going public. If you are joining a com…

I don’t really buy this, but that’s largely based on own fairly positive experience of stock compensation at private companies. I will say that I think these conversations tend to be a little distorted because people who have had positive experiences feel awkward about saying “i made $xxMM from employee stock” but people who haven’t seem comfortable saying “stock based compensation was worthless”. Also tbh a lot of p…

> Also tbh a lot of people are just really bad at judging companies and wind up working at startups that are obviously going to fail. You really do have to make an honest assessment of if you are good at picking winners.

It's luck, not good judgement. No-one knows how to accurately assess whether an early-stage startup is going to succeed or fail.

If it was possible, accelerators would have better-than-background rates of success. Even YC, who get their pick of pretty much every startup, has barely better than background rates of success.

If it was possible, VC's would have better than background rates of success. They don't. They rely on the successes being much bigger than the failures because the failures are limited by bankruptcy while the successes have no limits.

I think blaming people for being bad at judging early stage startup success likelihood is poor form when no-one else in the entire industry has any idea how to do this.