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Comment by andrewla | Hacker News Reader

I don't know why this is portrayed as a negative -- this is the whole point of an IPO. If the price goes up significantly, it means that the company lost out on capital that it could have raised. If the price goes down, then it means that it extracted more capital from early participants than the market at large thought was justified. It's far preferable, for the company, to be in the second bin than in the first.

If they need to raise more capital in the future, then the higher the stock price is the less dilution is needed for the same amount of money, so eventually they want the stock price to recover, but for now they're sitting pretty on top of a pile of cash that they got despite what the market seemed to indicate.

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If you are looking to liquidate the company, then yes, the goal is to get cash when you can. But if you are looking to create a growth story to attract employees, partners, future investment, you may want people to think there is an upside to the stock.

Yeah, there's also general morale among the rank and file.

Everyone's locked up for six months (except a few directors who are selling into the greenshoe). You can tell people to not even look at or think about the price for six months but human nature is what it is. Everyone's going to look at the IPO price and mentally anchor that as the minimum that they'll be able to cash out their options for. Most people will mentally come up with a range of IPO price as the min and some much larger price as the max.

To have the price immediately start dropping like this is not great for employee morale.

The execs can't, like, force the underwriters to exercise the greenshoe, so they'll be stuck holding the bag until the price rises above the IPO price, in that regard.

But isn't it likely that their strike price is much, much lower than the current price? If so, it's probably not that bad if the stock is down even 20% when they are able to sell. Obviously it's better if the stock price is higher, but it's not like they're going to be selling at a loss.

Eh... Uber gave me a job offer in October 2019 claiming an internal valuation of $120B. I found it to be completely unjustified and passed on the job, but I'm certain many others bought it hook, line, and sinker.

There were some really incredulous claims around the TAM of Uber Eats (and other efforts) that were proven outrageous in the S-1 filing.

I don't think they can just do that with ISOs? Pretty sure the valuation has to be audited iirc

The 409A valuation was $70B or whatever, but they were selling the equity as though it was already worth 70% more than the paper value. (Hence the distinction between their "internal valuation" and the 409A). It was super sketchy. Basically trying to argue that the offer they were giving me was already worth a ton more than it was.

I think (hope) you mean October 2018, and aren't time traveling.

Nope. It was October 2019! The paper valuation was whatever their last raise was (~$70B or whatever), but they were sandbagging on the equity and framing it as being worth far more than it was on paper.

(October 2019 hasn't happened yet)

Ha! I read that three times and it didn't click. October 2018 is correct. Thank you for the clarification.

Probably not for anyone who joined around 2016 or later:

https://news.ycombinator.com/item?id=19880249

> If you are looking to liquidate the company, then yes, the goal is to get cash when you can.

Not liquidate the company, raise money to fund user growth or tech development.

> But if you are looking to create a growth story to attract employees, partners, future investment, you may want people to think there is an upside to the stock.

In that case what matters is what happens over the next year, not what happens over the next week. If they fell to $20 this week and then stayed there for a month before gradually starting to go back up, all the better for future employees and investors who get to buy in at the lower price.

While you're right that long-term matters more, you have to think about the short term implications:

- People who joined late-stage, and that may have taken a lower salary for the upside once they IPO'd.

- Recruiting new people could be come a lot more difficult if the perception is that the stock is worth a lot less.

On top of that, after patiently waiting for years that an IPO is going to be when the fruits of their labor are reaped, but no actually it could be much later than that is not likely to help retention.

If you are only looking create value __only__ for early investors, then extracting all there is at IPO makes sense. But if you are looking to create value for employees who have given their blood, sweat and tears, it would be helpful to leave some money on the table to generate more demand and signal market confidence.

In the case of $UBER, from reading the axios piece, they seems to have extracted all there is from private market and the demand from public market appears to be even lesser.

Keep in mind that employees whose RSUs settled on IPO day are taxed at the IPO price, not the price when the lockup period ends.

Since the lockup expires in the same tax year, can't they just sell after the lockup, take the loss, and then use the loss as a write off against the RSU gain so they only pay taxes on the actual realized gain?

The initial RSU settlement is taxed as ordinary income. If they sell below the IPO price in future (e.g. to cover their remaining taxes) they'll indeed realize a capital loss but it can only be carried forward against future capital gains from e.g. longer-term holding of UBER or another stock, or using the $3000/year deduction for ordinary income.

Is that really true? Hard to believe since they are facing potentially millions in taxes!

It's correct. In the case of Uber, the company withheld shares according to the supplemental wage withholding rules (22%) at the federal level. Employees would still be liable for the extra 10-15% of the IPO price if taxed in the highest tax bracket.

> withheld shares according to the supplemental wage withholding rules (22%) at the federal level

Is the difference refunded through tax returns?

Yes, though most Uber employees (and tech company employees in the SF Bay Area in general) are going to be above the 22% bracket, and thus will owe more tax instead of being owed a refund. This is especially likely if the employee is mostly vested and thus settling a large block of RSUs all at once.

It is true and I also find it amazing that the company seemingly did nothing other than withholding 22% (below1M$). It seems like the switch to RSUs did not take into account the downside risk.

> ... did not take into account the downside risk.

Web 2.0 companies in a nutshell

What % of employees with stocks would that apply to, in your estimation?

Price goes up: This is good for Uber. Price goes down: This is good for Uber. Price goes sideways: This is good for Uber.

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