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Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

nytimes.com

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Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#51

Post by soup10 »

_9vpl wrote: post #18
pmiller2 wrote: post #11

Earlier quoted context omitted.

Anybody who thinks this offer is meant to benefit employees isn't looking much beyond the surface. The fact that it includes a release of claims, a noncompete clause, and an NDA is a solid clue that this move is intended to benefit Palantir and not employees. Edit: forgot noncompete clause.

That's all standard stuff. If I was at a company for 11 years, I'd sure as hell want to cash out. Whether their offer is a good price or not, who knows.

You can only cash out 12.5%. 12 month non-compete for a small cash out is a pretty double edged deal.

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#52

Post by argonaut »

cbsmith wrote: post #48
argonaut wrote: post #23

Earlier quoted context omitted.

Given that the buyback price is above market price , I don't see a problem with this. Palantir is compensating you for signing a noncompete/NDA. If you don't want to sign those things, you are free to sell on the private markets for less than what Palantir offers you.

> you are free to sell on the private markets for less than what Palantir offers you Perhaps you are more aware of the terms on those shares than the rest of us, but generally you aren't quite "free" to sell the shares on the private market.

Read the article more carefully: "Palantir did not impose restrictions on employees or stockholders selling shares in the private market."

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#53

Post by Steeeve »

ridgeguy wrote: post #26
codys wrote: post #8

Palantir's official reason of "improving employee moral" doesn't seem to really mesh with the conditions they are imposing on the buy-back: > [...] employees who sell their shares agree agree that they will not compete with Palantir for 12 months or solicit any Palantir employees during that time [...] [and] agree to a nondisclosure arrangement that forbids them from even talking about the repurchase and waive any cl…

If Palantir is a CA business entity (I didn't check, maybe it's a DE corp), its noncompete should be per se invalid (= automatically void) in CA. There are only a few circumstances in which noncompetition agreements are valid in CA, and this doesn't seem to be one of them. See section 2.1.2 in: https://en.wikipedia.org/wiki/Non-compete_clause#Exceptions_... Palantir's attorneys surely can't have missed this, but I do…

A non-compete clause in an employment agreement isn't valid. I think it's arguable for a stock option agreement. At that point it's not a one-sided agreement. The employee is gaining something in exchange for their non-compete, and can opt out if they want.

I would bet they don't apply that to existing employees, but they'll give it a shot on anyone hired since the change.

If this turns into a trend, it will mean a very interesting change to silicon valley culture. I read a blog post a couple of days ago that the average tenure for a software engineer at a medium to large company in SV was 1.5 to 2 years. With an effective way to push non-compete agreements on employees, that would be... significant. It would take a lot of companies doing it at once, though. Otherwise everyone would simply avoid the handful of firms that did it. After looking at this summary, I wouldn't work for Palantir. If I did, I'd have to consider the stock completely valueless.

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#54

Post by argonaut »

solidsnack9000 wrote: post #25

> Mr. Kupor notes that extending the exercise time for former employees makes their options more valuable at the expense of employees and investors. (It does so because former employees have a longer time to exercise their options and dilute the other shareholders.) This is simply a falsehood. Exercises of options of do not dilute shareholders -- new issuances do. Former employees do not issue new shares.

It's not an outright falsehood. He's referring to the (correct, but also insidious) fact that compared to a 90-day exercise window, more people will end up exercising under a more extended window - and this will dilute. In other words, extended windows reduce the number of options returned to the pool, and are thus slightly dilutive.

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#55

Post by daemin »

soup10 wrote: post #51
_9vpl wrote: post #18

Earlier quoted context omitted.

That's all standard stuff. If I was at a company for 11 years, I'd sure as hell want to cash out. Whether their offer is a good price or not, who knows.

You can only cash out 12.5%. 12 month non-compete for a small cash out is a pretty double edged deal.

But if you are still working there and do not plan to move then being able to liquidate up to $500,000 worth of shares seems like a very good offer.

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#56

Post by Steeeve »

argonaut wrote: post #29
ridgeguy wrote: post #26

Earlier quoted context omitted.

If Palantir is a CA business entity (I didn't check, maybe it's a DE corp), its noncompete should be per se invalid (= automatically void) in CA. There are only a few circumstances in which noncompetition agreements are valid in CA, and this doesn't seem to be one of them. See section 2.1.2 in: https://en.wikipedia.org/wiki/Non-compete_clause#Exceptions_... Palantir's attorneys surely can't have missed this, but I do…

This is one of the exceptions to noncompetes in California - when you sell your interest in a company. They are a Delaware corp. They have tons of employees outside of California (New York?).

Actually, I think you have to be selling the whole business - but from my comment above - it's not part of the employment agreement, so ... it's possibly enforceable. Maybe not, but I wouldn't count on it either way.

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#57

Post by lmm »

argonaut wrote: post #22
jegutman wrote: post #20

Earlier quoted context omitted.

I actually disagree with the 10yr time frame (although will admit it has its merits), but also agree with some of your logic. I just think that the 10yr "fix" solves some problems and creates others. I think this issue is that you should: A) not rob former employees of accrued stock value B) probably try to somewhat reduce incentives to leave if the company is going to continue to do well There are a few problems I s…

There's a huge tax hit. Giving shares is taxed as ordinary income.

All of these things should be taxed as ordinary income. Companies shouldn't be able to do an end-run around taxation by giving you valuable stuff instead of giving you money directly.

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#58

Post by lmm »

gonehome wrote: post #33
honkhonkpants wrote: post #31

Earlier quoted context omitted.

If you exercise shares in a dark market why don't you just mark them at zero? If they aren't trading you can just make up the price and that goes for any good not just shares of companies.

Just because a company isn't public doesn't make it a 'dark market' (not sure what that is). The 409A valuations are real and there are rules surrounding how exercise happens. You can't just sell them outside of that and not pay taxes. You could theoretically sell the shares once exercised to some other private investor if you can find one, but you'd still have to follow the same exercise rules.

Feels like there should be some kind of "shotgun clause" equivalent. The government wants to value your illiquid asset at $x for tax purposes? Fine, but if you disagree with that valuation you get a corresponding right to sell that asset to the government for 90% of $x and make it their problem.

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#59

Post by [deleted] »

lmm wrote: post #57
argonaut wrote: post #22

Earlier quoted context omitted.

There's a huge tax hit. Giving shares is taxed as ordinary income.

All of these things should be taxed as ordinary income. Companies shouldn't be able to do an end-run around taxation by giving you valuable stuff instead of giving you money directly.

[deleted]

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#60

Post by lmm »

jonathankoren wrote: post #34
gonehome wrote: post #19

Comments on this thread are not very interesting and generally off topic. This article points out an issue in SV which is that it's hard for employees to get value out of options held in companies that do not go public. One reason for this not mentioned in the article is that in the US the tax burden is extreme - partially because when it was implemented it expected companies to go public. If you hold options in a pr…

Yeah, the ISO spread with the AMT is bullshit that basically keeps the plebes in their place by not actually letting them get any windfall. However it seems like the real problem is exercising post-IPO. In the post-IPO world, you're dealing with say a 5x to 10x spread, possibly even more. In the pre-IPO world, your spread is probably 2x at most, which is much more manageable. One clarification with what you said, is…

The notion of "realizing" seems like nonsense to me. You get given a piece of paper worth $100, you should get taxed for $100. Whether that piece of paper is a federal reserve note or a stock certificate should be an irrelevance, no?
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