I assure you, you will have no trouble selling Stripe stock at what its worth. There is a big appetite for Stripe shares in the secondary markets even if the company never goes public.
Stripe has "double trigger" RSUs, meaning you don't actually own them until after IPO + lockup period. There are tax advantages to doing it this way, but it means that a senior hire "getting" $200k/year can't sell on the secondary markets, and may be getting shares that they will never be able to sell for their supposed value.
>"Stripe has "double trigger" RSUs, meaning you don't actually own them until after IPO + lockup period. There are tax advantages to doing it this way, ..."
Interesting. I've not heard of the term "double trigger RSUs" before. What are the tax advantage of this over regular options? Most companies have right of first refusal of secondary market sales of pre-IPO stock. If the goal was to prevent secondary market sales. What does "double trigger RSUs" provide that right of first refusal does not?
There are some benefits for employees. So long as the company goes public, RSUs are worth something unlike options which can be underwater. You don’t have to pay to exercise them. Tax is only due at IPO and treated as normal income. There are none of the rules around AMT. There’s not the risk as with options of paying out of pocket to exercise plus taxes then the stock drops or there’s no liquidity and you’re net negative.
From the company’s perspective, employees with RSUs are not actually shareholders until IPO. All those SEC and state rules about having to report like a public company once you have a certain number of employees are avoided. It essentially lets companies stay private much longer.
The (arguable) tax advantage is that the employee isn’t taxed until they are able to sell the RSUs for the same value they are taxed at (since company is public and lockup is past) so you avoid a tax burden on a non-liquid asset.
The “double” trigger is the ipo requirement plus the usual time-vesting for stock grants
If a Stripe employee has $100,000 worth of RSUs and leaves Stripe now, what happens to their RSUs?
Stripe has double-trigger RSUs which won't vest until after IPO.
Do they get to keep these RSUs until after the IPO + lockup period, even though they're not employed at Stripe anymore? (Is there another name for RSUs owned by someone not employed by a company anymore? e.g. unvested shares?)
Yes, the employee will still get the RSUs they earned once ipo + lockup happens, even if they’re no longer at stripe. Not sure what the term for that is, though.
Many companies actually prohibit employees from selling shares to third party investors (including investors on marketplaces like EquityZen) without board approval.
This is a really fair and important point - I appreciate you bringing it up.
I've seen a couple of Stripe secondaries before so I assume that some set of employees are able to transact on the secondary market.
However, important disclaimer that not all companies have the same terms - and the terms can change depending on when you were hired. Startup equity isn't absurdly complicated, but it very much is situation-specific which is where the confusion usually comes from.
Not a loss, per se, but if you were told you were receiving $200k in compensation as RSUs, and they drop in value to $50k, you could argue that's a $150k loss. It's absolutely a loss when you factor that in as compensation for the effort and labor your produced for them rather than co-onwership of the company, which RSUs decidedly do not represent.
If you are accepting stock or stock options as compensation, that's generally coming in lieu of cash. Maybe you had an offer somewhere else with $30k more in salary, but you took this offer instead because the projected value of the stock made the total compensation higher. If you sell your stock after 4 years for $50k, you have taken a $70k loss relative to the other offer.
I’d love to count profits and losses relative to the best possible outcome in hindsight rather than the difference between what was spent to obtain an asset vs. what I got for it, but generally that’s not how the IRS sees things. A loss is not relative like that.
I'm not quite sure what you're saying, but RSUs are only taxable at vesting, and are taxed based on their market value at vesting. If the companies stock is worth less per unit, then you are taxed less.
Might not be the case here but, generally speaking, it's unfortunately not uncommon for stock option agreements to _require_ the recipient to exercise them at a certain time- in particular, when they leave the company who is granting them.
I think he means sold for less than what it was on paper at the beginning. Like you start to work there and it’s valued at 200k but then time passes and now it’s at 30k.
