Options vs RSUs

Jan 8, 2021 44 Comments

A company I am considering is switching from options to RSUs. I can choose which offer I want:

Base salary $200k

Offer A: 100,000 options at strike price $1
Offer B: 20,000 RSUs

Preferred price $10
Same vesting schedule

How should I compare these two offers? Obviously the options involve a cost to exercise, but the upside potential seems tremendous. It gets murky when considering tax implications.

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TOP 44 Comments
  • Stripe
    SxIv27

    Go to company page Stripe

    SxIv27
    From a tax perspective you will benefit from the options. Part of the tax will be AMT which you will get back from the government via a tax credit and the remainder will be considered capital gains (so ~20% depending on whether you hold for a year after you exercise and also depending on your tax bracket). RSUs are taxed as normal income so you will probably pay something like 37%. The risk with the options is you will need to pay up front to exercise and also to cover the taxes (exercise price - strike price) when the shares will likely be illiquid. If you dont think you will have the cash to do this then you can exercise earlier to pay a lower spread on the 409a vs strike price but its a bigger risk since you are further away from knowing if the shares will be liquid and their value at that time. If you want to take no risk then go with the RSUs, but you could easily make 30%+ the money from the options even if you got the same quantity of RSUs if you play the tax game properly. And in your case you already have a 1:5 quantity ratio in your favor.
    Jan 9, 2021 9
    • New
      hugh jarse

      New

      hugh jarse
      your advice is bad. in very very very large majority of cases you should not exercise “ASAP”. of course there are circumstancial exceptions. not possible to cover that in this kind of forum.

      i retract my disclaimer. both you and stripe are wrong. bad advice based on your personal situation and only answered with the benefit of perfect hindsight.
      Jan 13, 2021
    • Stripe
      SxIv27

      Go to company page Stripe

      SxIv27
      I just laid out how they should think about making a decision. That logic was informed by doing a lot of independent research and speaking with two different tax advisors.
      Jan 14, 2021
  • New
    hugh jarse

    New

    hugh jarse
    RSUs. 100% no question. you are a working man. you don’t have $100k to exercise. even if you did, not a great idea and do they even offer early exercise? most don’t. and not at the stage when RSU are up for offer. ergo, the options are handcuffs. RSUs are closer to being cash. bird in the hand and all. no question whatsoever.

    id pass altogether tbh. shitty game they are playing with their *employees*. shitty company
    Jan 12, 2021 14
    • I think you’re confused, I didn’t give any advice.
      Jan 15, 2021
    • New
      hugh jarse

      New

      hugh jarse
      didn’t say you did. the others did. sorry the word “you “ is a bit difficult in english. i didn’t mean you personally
      Jan 15, 2021
  • Lyft
    data drive

    Go to company page Lyft

    data drive
    Are you there for the upside? Options seem like a no brainer.
    Jan 8, 2021 1
  • Uber
    Clpn22

    Go to company page Uber

    Clpn22
    1:10 ratio between strike price and preferred means they are a long way from IPO
    Jan 8, 2021 1
    • New
      hugh jarse

      New

      hugh jarse
      normally yes but i wonder. nobody in their right mind offers RSU this early. also nobody even has 1:10 ratio anymore at any point after seed. so i think the ratio unrelated to stage.

      not enough information provided tho
      Jan 12, 2021
  • PayPal
    sandypipe

    Go to company page PayPal

    sandypipe
    Options with $1 strike price looks good
    Jan 8, 2021 0