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Stripe sets one-year timetable to decide on going public
- bbq 4y agoImportantly they said within a year they will go public OR do a private market transaction to make employees liquid
- Aqua_Geek 4y agoThat’s a LONG time (in total) for employees to wait for liquidity. Yes, they likely provided some opportunities for early employees to liquidate some of their holdings, but it’s got to suck to sit on that much funny money for so long.
- preinheimer 4y agoThey've had several options for employees to liquidate some of their holdings before now. They've generally only been open to current employees, but one a few years ago was also open to past employees.
- clintonb 4y agoThose offerings are only for options holders. RSUs cannot be traded; otherwise, every RSU holder has to pay taxes.
- a_t48 4y agoThis happened to me this year with another company. They opened up the ability to sell back RSUs, and a chunk of them got sold to pay for taxes.
- lbotos 4y agoI assume Stripe is giving out "Double Trigger RSUs" then? https://blog.pragmaticengineer.com/equity-for-software-engineers/#5-double-trigger-rsus https://blog.pragmaticengineer.com/equity-for-software-engin... Otherwise people are getting taxed now anyway if they are getting RSUs at a private Stripe, right?
- ywain 4y agoCorrect. Stripe gave out stock options until around 2016 or 2017, then switched to double-trigger RSUs.
- calr 4y agoNoob question that I am sure is answered many times. What are the catalysts for a private company switching from options to RSUs (double trigger). In my previous role I got RSUs (double trigger), but now at a much smaller startup I have an option package. As an employee RSUs are a bit easier to make sense of, but both are equity instruments at the end of the day. When, and why does that transition happen? Edit this is answered fairly well here: https://www.parkworth.com/blogs/pre-ipo-tech-giants-using-double-trigger-rsu-vesting https://www.parkworth.com/blogs/pre-ipo-tech-giants-using-do.... The TLDR is SEC rules and limited perceived upside of options (although I imagine that could be solved via a lower strike price).
- chimeracoder 4y ago> What are the catalysts for a private company switching from options to RSUs (double trigger). For employees at very early companies that are going the venture route, ISOs are a no-brainer. The company is small enough that the strike price isn't too onerous, the company is too small to hit up against the IRS limits, and they provide pretty good tax treatment under the assumption that the company will grow massively in value - like, 100,000x - which is the the optimistic case that everyone wants to optimize for. For employees at late stage companies (e.g. last funding round before IPO), ISOs are a rough deal. The strike price is large, so the only people who can afford to exercise them before a liquidity event are people who are already independently wealthy. The tax benefits are also still present, but smaller, because the expectation is that the company might grow 10x in valuation, but not 100x or 100,000x (most $100M companies are not going to grow to $10 trillion in valuation). RSUs avoid that problem, by requiring zero cash up-front, in exchange for less favorable tax treatment in the "company grows 100x-100,000x" case - which is fine, because that's less relevant. Of course, the billion dollar question is where the inflection point happens - when do RSUs become a better deal than ISOs? There's no universal answer to that, and some of that depends on specifics of the company, and some of that also depends on who you ask (certain people will benefit more than others from the switch at different points, so it depends on how much the company is weighing each of those [metaphorical] stakeholders). ISOs also have one other advantage for companies: because they have to be exercised within 90 days of departure, a large portion of ISOs that are granted will never actually be exercised (the employee will choose to leave them unexercised, either because they don't have the money to pay for the exercise price + taxes or because they don't want to). So every option granted is <1 share actually given up (in expectation), allowing the company to grant bigger compensation packages (because some portion of those will not actually be used, and can therefore be reallocated to someone else). With RSUs, every RSU granted is 1 share actually given up (except in the case where the RSUs expire, which makes the company look bad).
- jcdavis 4y agoit can be done (via eg waiving the 2nd exit trigger and converting to common) but is pretty complicated
- scarface74 4y agoAs someone who only has dealt with public companies, how is that different from my having to pay taxes when my RSUs vest?
- alasdair_ 4y agoAt Stripe, when your RSU vest, you still don't have the ability to buy the shares. Instead you have to wait for a liquidity event, or for 7 years to pass (making the shares worthless).
- scarface74 4y agoWith RSUs, stock is deposited in my brokerage account that I can sell anytime I want. I get to choose whether I want them to sell enough to cover taxes or whether I want to cover taxes some other way, So you get absolutely nothing liquid when you get your RSUs at Stripe? What’s the point and how is that different from getting stock options?
- zrail 4y agoPublicly traded stock gets deposited in your brokerage account because your employer is publicly traded. Private companies offering double trigger RSUs that don't turn into shares or cash until a liquidity event (I.e. an IPO). At that point (plus a lockup period, maybe, depending on how the company goes public) the shares, minus withholding, will get deposited into a brokerage account and be available to sell. (Disclaimer: I am a holder of Stripe RSUs)
- msoad 4y agoAn IPO will be longer. With the locked out period it will be more than a year
- makestuff 4y agoNot necessarily if they do a direct listing.
- khazhoux 4y agoA direct listing would be very unfair to the banks that have patiently waited years to take a multi-billion-dollar chunk of Stripe’s upside in exchange for setting the IPO price (integer between 20 and 50).
- mercedsownboy 4y agoThank you for a great chuckle
- nerpderp82 4y ago> unfair to the banks
- WXLCKNO 4y agoI chuckled once more.
- htrp 4y agoThe level of shade is about as high as the expected ipo pop
- yieldcrv 4y agobut at least in an IPO the company would get a financing round, and the banks get to manipulate the market with a stabilizing bid indefinitely direct listings completely rely on retail buyers for liquidity, and even in the frothiest markets that's not enough money in the face of all employees and the company dumping shares immediately
- mguerville 4y agoInteresting timing, wouldn't think it's optimal given macro conditions, but perhaps they don't want to wait however long it'll take to get back to the frothy markets
- shawnz 4y agoIt's because the earliest RSUs they issued are expiring this year: https://www.theinformation.com/articles/stripes-early-stock-awards-could-spur-ipo-plans https://www.theinformation.com/articles/stripes-early-stock-...
- Aqua_Geek 4y agoThey’re options that are set to expire, not RSUs. Yes, the employees could exercise them to prevent them from expiring, but then Uncle Sam comes to collect his dues. And that’s where illiquidity burns you.
- deleted 4y ago[deleted]
- chimeracoder 4y ago> They’re options that are set to expire, not RSUs. Both options and RSUs are required by law to have expiration dates. And it's plausible that either or both could have expiration dates within the next 12 months.
- kasey_junk 4y agoDouble trigger rsu’s in private companies also expire and holders of those have no option even to eat the taxes in that case. They just lose them.
- Aqua_Geek 4y agoGood point. I forgot about that.
- 4y ago
- TekMol 4y agoIt's interesting that there is so much technology and third party business involved in the process of moving value. - Visa has a market cap of $463B - Mastercard $362B - PayPal $90B - Block $48B Could it theoretically all be automated?
- rglover 4y agoYes, with Bitcoin.
- methodical 4y agoAnd by using Bitcoin to automate all these transactions you get a bunch of very cool features such as constantly being at risk of losing your life savings due to phishing, scamming, hacking, etc., etc., etc. unless you store a hard wallet in your intestines and memorize the recovery words (better hope you don't forget any or your life savings is gone!). The cool thing about all of this is that it's a feature of Bitcoin to be able to irreversibly lose your life savings, without any ability to recoup your losses. All of this to say that Bitcoin is obviously the way forward for global transactions, despite the fact it processes transactions as slow as molasses and the only way to make it faster (Lightning Network) is to sacrifice the checks and balances that maxis praise as the hallmark of Bitcoin lol
- rglover 4y ago> And by using Bitcoin to automate all these transactions you get a bunch of very cool features such as constantly being at risk of losing your life savings due to phishing, scamming, hacking, etc., etc. All lies. > unless you store a hard wallet in your intestines and memorize the recovery words (better hope you don't forget any or your life savings is gone!) Lies. Just write them down and store them securely. You can memorize them if you like. It's also wise to store multiple physical copies in various locations to avoid this exact scenario. > The cool thing about all of this is that it's a feature of Bitcoin to be able to irreversibly lose your life savings, without any ability to recoup your losses. Yes, you can't be utterly careless (and I'm not sure what the argument is for wanting to be). > the only way to make it faster (Lightning Network) is to sacrifice the checks and balances that maxis praise as the hallmark of Bitcoin Yes, which makes sense for small transactions between trusted parties. Large transactions can and should be done on-chain (also with trusted parties). -- I'll continue to listen to the signal [1], not the noise. What makes me happiest is that the people who deserve to win the most will win over the people who deserve it the least. It will be the greatest wealth transfer humanity has ever seen and it won't require any violence or coercion. [1] https://twitter.com/LightningTipB0t/status/1615014798797991938 https://twitter.com/LightningTipB0t/status/16150147987979919...
- rvz 4y agoMaybe they should have IPO'd or directly listed in 2019 at the very peak when everyone else was rushing to the exit as I said before [0]. Of course this is also not in hindsight either. [1] Seems like they now don't want to wait anymore and just unload their shares into the market and especially onto retail investors. [0] https://news.ycombinator.com/item?id=32567217 https://news.ycombinator.com/item?id=32567217 [1] https://news.ycombinator.com/item?id=20993919 https://news.ycombinator.com/item?id=20993919
- fragmede 4y agohindsight is 20/20
- cschep 4y agoyou know what they say.. hindsight is 2019.. :D
- Province1108 4y agoNot really when the terms of private financing during the bull run were very generous for valuations and terms. There are big downsides to being public, including all the regulatory requirements and pandering to institutional investors. Now the bull market is over and private money is tighter, they don't really have a choice but to raise money publicly.
- ergocoder 4y agoGood for billionaire lords not employees. Coinbase on the other hand is very employee friendly in terms of liquidation. Their employees are rich as fuck with direct listing (no lockup) at the height of the market. Just think about it. Coinbase, who is ridiculed for being apolitical, treats employees better than Stripe.
- neonate 4y agohttps://archive.ph/GqSBm https://archive.ph/GqSBm
- djyaz1200 4y agoIs there any way to buy stock from employees now?
- drexlspivey 4y agoThere are secondary markets for private companies' shares (like EquityZen) but I believe you need to be an accredited investor to participate
- paxys 4y agoThere have always been ways. Find an employee and make them an offer. Or use one of the many private marketplaces.
- umeshunni 4y agoEquityZen had an offer to buy last week at a $75B valuation / $32 per share.
- JumpCrisscross 4y ago> EquityZen had an offer to buy last week at a $75B valuation / $32 per share That's wildly off market, like 30%+. That's high, even for a retail platform.
- magneticnorth 4y agoWhat do you mean by off market? Are you saying the value should be 30%+ higher or lower, and how did you get that? Obviously the usual kind of market isn't applicable here, so I'm curious what you mean.
- umeshunni 4y agoI think they mean it's 30% higher than 'market'. I've seen article stating that Stripe's current internal valuation is like 60B or so. That valuation might be what they're referring to.
- mkl95 4y agoTIL Stripe have lowered their internal valuation from $95bn to $63bn since mid 2022.
- paxys 4y agoConsidering so many public, profitable tech companies saw their valuations go down by 50-70% in that same period, that still seems too little of a cut.
- agloeregrets 4y agoThis assumes Stripe is not outperforming expectations. .which seeing the Amazon deal....
- objclxt 4y agoIt’s unclear that the Amazon deal is outperforming expectations versus a quid pro quo on AWS hosting.
- agloeregrets 4y agoEither is an upside. That’s a huge contract that any payment processor would kill for.
- bdcravens 4y agoPublic companies have more external influences on their valuation. It's not like they literally lost 50-70% of their intrinsic value, only what the market with the associated psychology says they are worth. Private companies can stick closer to that intrinsic value.
- paxys 4y ago> Private companies can stick closer to that intrinsic value It's normally the opposite. Public markets are a lot better at judging intrinsic value than a handful of VCs. Every single private company out there is either wildly over or under-valued, more so at earlier stages.
- babl-yc 4y agoI assume this is in part due to the 10 year expiration of ISOs? Stripe was founded in 2010.
- eagleinparadise 4y agoOof, there were a lot of secondaries done at some pretty ridiculous valuations, multiples of the valuation before it was just cut
- indus 4y agoStripe reminds me Cisco systems in 1999. Cisco powered the Internet economy. Savvy CEO and team and amazing execution. Stock traded at $60 in 2001. Went down to $16 in just 2 years and still at $40 after 25 years. Stripe is equally relevant. It may not achieve the same private market valuation of $95B for some time. But we love the company, and will continue to use it as a partner, customer, and cheer leader.
- TimPC 4y agoIt’s honestly perplexing that so many tech companies have stayed private for such a long period of time. Especially in an era of rising interest rates and rising mortgage costs, people really want to be able to sell their stock. The difference between packages with equity you can sell and equity you can’t sell is gargantuan and there are massive benefits to having a public price that lets people fairly value that equity. Hoping to get fair value in a private market transaction is far from ideal and many employees will feel they are being forced to pay an unfair premium for liquidity.
- alephnerd 4y agoWhy go public when until 9-12 months ago you could raise IPO level cash ($100-300mil) in a Series D/E/F/G and with none of the SEC scrutiny. It's better for founders to remain private as long as possible. It's better for employees for companies to go public as soon as possible. For VCs it depends on what stage they are at in capital allocation (companies funded in the earlier stage of a fund will have more leeway cuz VCs don't need to pay back their investors, but companies funded at a later stage will be pushed to exit faster cuz you gotta make the investors whole) The Collision brothers and the Hindawis (Tanium founders) have both been very vocal about this point.
- Arainach 4y agoAfter the last 6 months (to say nothing of the last few centuries of capitalism) you still believe companies care about what employees want? Executives/Founders get loans against their illiquid but enormous equity, everyone else can go to hell as far as the decision makers are concerned.
- dzikimarian 4y agoWhat's perplexing for me is that, yesterday on HN I've seen crowd with pitchforks demanding CEOs of publicly traded companies to be laid off, along with the employees for giving up to the pressure of shareholders. Today I'm seeing ton of comments about how company has to go public, because otherwise employees (who have excellent compensation apart from stock) will have to wait a few months to liquidate their assets. Seems like certain altitude doesn't come with MBA title, like some want to believe :-)
- graderjs 4y agoAny likely consequences for Stripe’s customers if they become public?
- 1letterunixname 4y agoGoing public isn't a badge of honor: it's a last-ditch method to find external financing where private investors wouldn't bite.