Former Uber Employees Have Gone Into Debt To Hang Onto Shares They Can't Sell (qz.com) 72
An anonymous reader quotes a report from Quartz: Uber employees are lining up to sell their stock to Japanese technology giant SoftBank, which will buy up to 17% of outstanding shares for $33 each. The price represents a 30% discount to Uber's last valuation, of nearly $70 billion, but for current and former employees, the SoftBank tender offer is a rare chance to convert paper wealth into actual cash. To qualify for the tender offer, participants must have at least 10,000 Uber shares and be "accredited investors," an SEC designation (pdf) for wealthy individuals. Current Uber employees can't sell more than half of their stake; there are no restrictions on former employees. The deal is on the table until Dec. 28, and could fall through if there aren't enough shares on offer for SoftBank and a small consortium of other investors to purchase at least a 14% stake in the company.
Working at a successful startup is often viewed as a quick path to prosperity, but the reality is more complicated. Startups tend to offer equity packages, typically in the form of stock options, to compensate for below-market salaries. But as companies like Uber have stayed private longer, most employees haven't been able to get rich from those shares. Quite the opposite, some former Uber employees have gone into debt to hang onto shares they still can't sell.
Working at a successful startup is often viewed as a quick path to prosperity, but the reality is more complicated. Startups tend to offer equity packages, typically in the form of stock options, to compensate for below-market salaries. But as companies like Uber have stayed private longer, most employees haven't been able to get rich from those shares. Quite the opposite, some former Uber employees have gone into debt to hang onto shares they still can't sell.
Paycheck (Score:1)
The devil pays in unredeemable stock options for a company in a perpetual state between collapse and a liquidity event.
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Right for private, 'pants on head' wrong for publicly traded.
Also devil is in the details. How long to vest? How long to exercise after separation? 'No sell' windows? Right to sell option to 3rd party, unexercised etc etc.
For startup, just ask for equity (less shares than options offered, no doubt) delivered on their proposed option vesting schedule. If they balk, they were planning on fucking you, not even kissing you when done. At least they expected their VCs to do a lot of employee option fucking o
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For startup, just ask for equity (less shares than options offered, no doubt) delivered on their proposed option vesting schedule.
An equity grant like that results in the employee getting taxed when they receive the stock, which they may not be able to afford since they can't actually sell any of the stock to cover the taxes. It's exactly that tax problem that stock options are intended to help with. It let's you decide when to take the tax hit.
The real problem is a combination of expiration dates on stock options (10 years typically) and late stage companies that don't want to face the discipline/regulations that come with being pu
Makes sense (Score:2)
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and doctotrs maybe forced to take the low Medicaid payouts and some may be willing to help push people on to SSDI so they can go to higher medicare payouts.
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If corporate sponsored health care disappeared, we would most likely move to a Canadian style single payer system, and Medicaid and Medicare would be absorbed into it.
In Maoist China each factory ran a school for the children of their employees, so if you changed jobs, your kids had to switch to a different school. That is obviously an idiotic system, but getting your health care from you employer is just as idiotic, and you only think it makes sense because you are used to it.
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An individual government mandate without a government-managed exchange like we have now would leave everyone in a risk pool of 1 (or some other tiny number if buying a family plan). You would end up with the old and infirm (you know, the people who actually need insurance) completely priced out of the market.
The only reason insurance is even vaguely attainable outside of employer or union negotiated contracts is because of the government operated exchanges creating larger risk pools for you to join.
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Or taxis suck in much of the country.
There was no functional taxi service where I live except for special events and airport runs.
With Uber and Lyft, short runs can be had in 5 minutes (I watched someone wait 3 hours for a taxi home from my shopping center, I called them a Lyft, 8 minutes).
Even in NYC, getting a pickup at the edges of Bushwick was spotty, and at night, they try to make sure you're not leaving for Brooklyn when getting in.
Maybe taxis do absolutely the most they can profitably (I know Uber an
Re: Makes sense (Score:2)
Yeah - you need to already be wealthy.... (Score:5, Insightful)
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To be fair, many of the things that require one to be an accredited investor are risky as all hell. So is Uber stock, honestly.
What the hell are you talking about? Risky as all hell? If you have an income over 200k for 2 years and expect to have that income going forward or if you have over $1 million in assets, you are an accredited investor. How is making a lot of money "risky as all hell"? You can also be an accredited investor if you are a broker, financial adviser or have a financial education. Like the parent said, "little guys can't play".
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You seem to have misread GP. He didn't say that it was risky to make a lot of money (that's a requirement of being an accredited investor). He said investments that require you to be an accredited investor are often risky. Which they are. Which makes sense, because the point behind the accredited investor rule is exactly to prevent people from gambling with money they cannot afford to lose.
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If that were actually the intent, then lottery tickets and casinos would likewise require people to prove they can afford to lose that money.
They don't, and this rule is just another way that the haves are trying to remove the ability of the have nots to better their lot in life. If one thinks otherwise, one hasn't been paying attention.
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I actually think the lottery is a classic case of lawmarker's lack of imagination. It's probably hard for them to imagine a few dollars being something someone cannot afford to lose, or that people would do more than buy the occasional scratcher.
Also, lotteries and casinos are clearly bad investments. A lot of the investments that require an accredited investor are much harder to value the risk on.
Now, that said, I imagine the reason the law passed was a coalition of those points of view and other people
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or you can simply wait until the IPO and then sell
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You don't think the day before the IPO, those options won't be cancelled, or shares split to the point of being worthless, or a new 100x voting class created just for the C-suite?
Options can be a rip (Score:5, Insightful)
The way options are taxed can make them kind of a bum deal. Depending on whether you're getting NSOs or ISOs, the price, and when you exercise your options can cost or save thousands.
Personally, I'd rather have a higher salary. Options are a nice bonus but, as in Uber's situation, they can also be a financial burden.
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Us Joe averages get stars in our eyes when we hear "stock options" because we've all heard the stories about the janitor at Microsoft that took some stock options and ended up becoming a millionaire later on.
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More important: a Foosball table
Been in several non-startup but middle sized tech companies and ALL of them made a big point about having one. No one ever used them, but they had to have it, because that's what made Google so rich, wasn't it?
please explain... (Score:2)
didn't read TFA so maybe it's in there.... but does this mean that they will lose their shares if the don't go into debt?
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They had to go into debt to turn their options into shares I assume.
Re:please explain... (Score:5, Informative)
Lets say you get 10,000 shares, at a strike price of $10 a share, with a 4 year vesting period.
Let's assume you worked there 4 years, so all of the shares are vested. If you want to "exercise" the shares, you have 2 options:
1) Buy the options with cash ($10 per share x 10,000 shares = $100,000).
2) If the company is publicly traded, you can also do a "same-day-sale". If the public price is higher than your strike price (lets say $20), you "buy" the shares at $10, then sell them on the open market at $20, and you pocket the difference, so you would make $100,000 (minus taxes).
Once you leave a company, all un-exercised options are forfeited after a time (90 days for example). For a private stock, you cannot sell them on the open market, so you only have the first option to buy them with cash. You now own all of those shares, but you cannot sell them publicly, so you have to hold onto them hoping that the company goes IPO, or an investor wants to buy them, like SoftBank.
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Worse you may owe taxes if the option price is less than the current "market value" which is probably the price the last round paid.
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Lets say you get 10,000 shares, at a strike price of $10 a share, with a 4 year vesting period.
Not likely. I've worked at six start-ups including one that went public and two that are moving in that direction. I was employee #80 at the one that went public, #666 at the next and #200ish at my current employer, so I speak from experience.
A strike price of $10 is not a realistic example. My strike prices have all ranged from 1/10 of a penny to $1.25. My most recent pre-IPO stock grants have been in the neighborhood of one dollar. So let's change your example to:
"Let's say you get 10,000 shares, at a str
Re:They Get What They Deserve (Score:4, Informative)
> create algorithms to take advantage of drivers and riders alike
If you think Uber was taking advantage of riders, you've never used the cab companies in Vancouver. Based on my usage of Uber in other cities (Vancouver has yet to get with the 21st century), I'd be happy to let them think they're screwing me as they'd still be half the price of a cab here AND faster.
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> the government will be able to off 1 million political dissidents a year without anyone batting an eye. Driverless cars and by extension Uber (since their entire business model is built around buying time until they can replace their fleet with driverless cars) are corrupt by nature.
Whoa there... now we're veering way into tinfoil hat territory.
So to paraphrase your position it's that Uber will be used to kill enemies of the government? Do you not see how most people might think that's a bit of a cra
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Whoa there... now we're veering way into tinfoil hat territory.
How is that even remotely tinfoil hat territory? The only things Silicon Valley has done over the years are automate jobs, consolidate power, spy on people for the government (under the guise of marketing mostly, though Google, Facebook, Amazon, Intel, etc and all the other major ones actively collaborate with the government and have specific publicly-known projects for doing so without the bounds of their specialization) and every single government in Human history given the blanket ability to do a thing
Tasty Kool-aid (Score:1)
That uber kool-aid tastes so good, just can't stop drinking it.
reminds me of some of the wall street boondoogles, and the F-35 one.
$2 trillion for a plane that doesn't work right, and is outperformed by older models.
To be clear, this isn't hurting the little guy (Score:2)
Quite the opposite, some former Uber employees have gone into debt to hang onto shares they still can't sell.
FTA:
Under current tax law, the income from exercising ISOs, a special type of option typically reserved for executives and senior employees, falls under an alternative tax calculation designed to prevent high-earners from using deductions to avoid paying tax. Non-qualified stock options, more commonly awarded to regular employees, are taxed the year they’re exercised on the gain in the stock.
It seems likely the people holding at least 10,000 shares are former executives who chose to exercise their stock options within the 30 days allowed by Uber upon deciding to terminate (or being terminated from) their employment.
Stock options are a way to reward executives financially outside of their normal pay structure. Exercising the afforded option(s) is typically only done when there's been a rise in the stock price during the option period.
TLDR: Nobody forces you to exercise the option on so
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Nobody forces you to exercise the option on some stock you cannot sell.
in your made-up fantasy world where there are no external forces and no other factors
keep going, you've almost achieved your goal of complete lunacy
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It seems likely the people holding at least 10,000 shares are former executives who chose to exercise their stock options within the 30 days allowed by Uber
Probably not. In the very early days of a startup, it is quite common for the first developers to get thousands of shares, at a very low strike price. I have heard of regular developers at my company that have hundreds of thousands of shares, at a sub-dollar strike price. Those people are given a very attractive stock offering because they are taking a large risk that they might lose their job if the company folds, so the company rewards them with more options. After a company has been in business, and
Reminds me of that Simpsons episode (Score:2)
Where the stock options for the startup are printed on toilet paper rolls.
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I would never accept those terms (Score:2)
Not one post has described this correclty (Score:5, Informative)
"Debt" Maybe Isn't the Right Word (Score:1)