Household tech names Airbnb and Stripe have gone to great lengths to prevent arcane tax rules from creating disaster for the employees who helped build those firms. Airbnb went public just before employees’ valuable stock grants expired, while Stripe is raising as much as $4 billion privately to avoid that fate. Foursquare—the once-buzzy privately held geolocation company—is taking a tack that’s less favorable to those employees: simply letting their potential stock grants vanish before they have a chance to cash in. The decision affects more than 100 former employees, some of whom were the earliest to work at the 14-year-old firm, according to five current and former employees. Foursquare’s decision represents the other side of the extreme startups face in dealing with an increasingly common problem for valuable private tech companies that have waited to go public. https://www.theinformation.com/articles/the-private-tech-company-that-let-employee-stock-grants-evaporate #tech #stock #stockoptions #rsu #tc
This is good info . I didn’t realize there was an expiration for the stock options.
All incentive stock option grants are required to expire by law in the US. You can always exercise them before they expire and hold the stock, but that can be very expensive (easily over $100k, and could be closer to $1M if you got options from a slightly more established company)
Ok.. then these very early employees can exercise them.. They have to pay more but there is some risk that foursquare never expires.. wouldn’t it be the same issue for the co-founders as well ?
Exactly. Founders cash out when they raise capital. Employees do not. And even if there is an IPO we have to wait a while to sell. We cannot sell the day of the IPO
What if a startup offers RSUs instead of options? Is there a downside risk to that with regards to taxes? I know a startup that started offering RSUs to employees after the series D round.
Wow, I had interviewed there a long time ago and got rejected.