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Former Uber Employees Have Gone Into Debt To Hang Onto Shares They Can't Sell (qz.com)
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.
The devil pays in unredeemable stock options for a company in a perpetual state between collapse and a liquidity event.
If Uber was going to be killed off it'd happened by now. The amount of money that is on the table when you're talking about a company that has managed to legally side step minimum wage and other worker protection laws can't be understated. Uber has redefined the work dynamic anywhere it's been allowed. They got away with it because the law was turning a blind eye to Taxi cab driver's abuse. Assuming there isn't a massive sea change in pro worker regulations then in 10, 20 years everybody but Doctors and Lawyers (who have strong Unions to protect them) will be in the gig economy.
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To get your money. Nice trick huh?
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.
That's our life, the big wheel of shit. - The Fat Man, Blue Tango Salvage
"employees have gone into debt to hang onto shares they still can't sell"
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?
Do you have a slide?
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 some stock you cannot sell. It's a gamble, like the majority of the investment in the market.
Happiness in intelligent people is the rarest thing I know.
Ernest Hemingway
Where the stock options for the startup are printed on toilet paper rolls.
> 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.
Since when do cab companies set their own rates? pretty sure (at least here in the States) there is a government commission which set's taxi rates, which is why taxi rates are the same between the different companies. Which is one of those pesky laws Uber violates.
Sorry, teleporters just kill you and then make a copy. A perfect, soul-less copy.
if an employer offered my stock in the complany instead of a full cashable paycheck i would refuse even walk off the job, i cant pay bills or buy gas or groceries with stock investments, i will remember this bit of bad press and take it to heart in case any skinflint corporate pirate offered me stock instead of a full cashable pay check
Politics is Treachery, Religion is Brainwashing
Pretty much, Silicon Valley has a habit of ignoring every law and thinking "it's OK, we work in tech," a bunch of corrupt marketing people, the entire area.
> 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 crazy thing to say?
Paper cash is at least liquid.
My other account has a 3-digit UID.
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?
bickerdyke
The issue is not with strike prices and taxes. It's that options have an expiration date. As an example, I was granted some options in 2007 at a (now publicly traded) company. They had a four year vesting period that ended in 2011 and a ten year expiration. So in October of 2020 (I don't know why it's not 2021), I can either (a) buy the options for cash and incur a tax event of (b) let them expire and lose all the value. Since our company is publicly traded, when I buy the options and pay cash + incur taxes, I can sell some of them to soften the blow. In fact, for publicly traded companies, any broker will arrange an "exercise and sell to cover" which basically mean you exercise the shares and then sell just enough to cover the strike price. At tax time, if needed, I could sell more. But if your company is still private when the expiration date comes up, you have to buy the shares and incur the taxes but you have no way to generate cash from the shares to cover those costs. That forces people to either lose value or take on debt to hold shares in a private company.
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 has done so regardless of morality when it suited them. Uber has been allowed to skirt taxi regulations around the world almost unhindered (certainly the case for the US,) where the average person can't so much as miss a year worth of taxes without going to jail and having all their possessions seized. To suggest Uber has no intention of collaborating (assuming they aren't already merely on data sharing, which is quite the assumption to make) is downright absurd. When it comes the conspiracies involving large corporations and the government the burned of proof is on the one trying to disprove them, as that is the far more outlandish position given every single publicly known interaction.
It's sad no one can buy employees shares yet, since Uber doesn't report to the SEC. The thing this tender offer does is allow smaller, poorer holders a price base to negotiate a loan from the bank. The loan is backed by the asset - the shares. It is a weird way to think about debt if you aren't an accounting or finance professional.