What happens when my stocks vest?
I currently work for a startup. We grew a business and then we got investors for us to go ahead with a major pivot. I have stocks in the company that will finish vesting in a little over a year. But then what? If the company doesn’t go public right away? I don’t fully understand how this process works and basically I’m counting down the days to leave the company. Any help or tips on how to best handle this are much appreciated!
Vest just means now you own the shares though with multiple caveats and subject to further dilutions. The market/investors/customers determine the value of your individual shares at some point. There is a secondary market you can sell some on (as a hedge on going public) but only if your company is “hot” enough. Here’s hoping you’re sitting on the next AMZN.
What are the general restrictions after you vest? And how do RSUs come into play? Early Lyft employee here and I’m also ignorant of the process - appreciate any guidance or recommendations on how to educate myself.
First IANAL Next, these get a little stickier for non-public companies unlike public firms that all generally do things the same ways. An RSU is a stock grant at a point in time. When you meet the grant condition you own it at “fair market value”. Problem is, what’s the fair market value of a privately held company stock? Your payroll department will assign you a value as it is a taxable event. Good luck challenging that value if you disagree though. YOU WILL BE TAXED ON THAT VALUE FOR THE VESTING YEAR. Don’t do what many did in the 2000s. Sell enough to cover your tax liability. Companies fizzle and you may suddenly have a taxable bill that exceeds the stock worth. It’s not hypothetical, it’s the real deal. Restrictions after you vest should be limited BUT as this is not public stock you may have more restrictions. Check with your payroll department. Also if you are director or C-level you have a lot more restrictions (but you should have a lawyer explain this already and not use some crazy dude on Blind) This was long. I think I covered everything... Edit: @Lyft congrats on the new funding round. Do (some) good with all that cheddar (when you vest)
💸 To elaborate a bit, I've never heard of anyone seeing actual money from startup equity unless the company exits.