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Comment by JumpCrisscross | Hacker News Reader

> where you take out loans get your salary - and you only actually make money if your company grows 10x in one year - and even in that case your benefit is slim - while the VCs and founders walk off with 85% of the gains

Better: the VCs own stock with liquidation preference over the common stock they loaned you money to buy. If there's venture debt, they are also part of the estate that will be paid by those loans if the company goes bankrupt.

This all smells. Especially given, to my knowledge, Bolt didn't let even its employees take liquidity in their shares through traditional channels.

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Can the SEC pursue Bolt for this?

For what? This thread is full of misunderstandings. What is it you think Bolt did that the SEC should pursue them for? If it’s alleged they fraudulently hid risks, etc., it’s one thing, but so far all that seems to have occurred is they offered something that has pros/cons, disclosed risks, half wanted to take the risk for the pros, and in hindsight, perhaps it was a bad deal since valuations are tanking industry wide.

> what is it you think Bolt did that the SEC should pursue them for?

Bolt offered, with multiple conflicts of interest, what are essentially margin loans to potentially unsophisticated borrowers. The $300 credit for a financial advisor the CEO tweeted about should, alone, be presumptive.

To be clear, I don't think anyone did anything intentionally wrong. (Also, I learned about this yesterday, so there’s that.) But wanton incompetence bordering on--perhaps crossing into--negligence, enabled by a Board that absolutely should have known better, can and should create liability.

What conflict of interest?

The company tried to do something beneficial for its employees, although perhaps it was misguided. They gained nothing here except the marketing benefit of trying to be employee friendly.

Margin loans are risky because you can get liquidated and lose your other principal. This was a cashless loan, that was only 50% recourse, so the only risk is that you may have to pay back half of what you bought the stock at if it ends up worthless.

I don’t think there was any incompetence or negligence here, and even if there was some incompetence, that’s not a theory of liability.

> What conflict of interest?

Issuer is the lender is the employer. This is a mess of conflicts.

> company tried to do something beneficial for its employees, although perhaps it was misguided

I agree. (Though it ignores the stupidly simple, entirely common alternative: cut the loan crap and just give them the money.)

> was a cashless loan, that was only 50% recourse, so the only risk is that you may have to pay back half of what you bought the stock at if it ends up worthless

For that 50%, it’s identical to a margin loan. We regulate those because lending against magic numbers that go up is a consistent failure mode in capital markets.

Employers cannot replace financial advice from an advisor with a fiduciary duty. Providing general education is good, and so is getting them free sessions with a financial advisor. But I don't totally agree they should be liable.

This was an incredibly risky program, and I don't understand how Bolt was valued last year. But engineers were potentially sitting on a life changing amount of money. Not exercising could have cost engineers hundreds of thousands in additional taxes if Bolt had a great IPO. They needed to get financial advice from an independent advisor.

The VAST majority of employees at Bolt would not get life-changing amounts of money at an $11B valuation.

Unfortunately, they'll probably never be able to sell their shares for even a fraction of that amount anyway.

The first 5 engineers would be incredibly lucky if they got 0.1% - who knows how many of them fully vested and still have shares. I'm guessing less than half. There's MAYBE one person who was looking at close to $11M.

Engineers after that would be incredibly lucky to even get 0.01% of the company. That's $1.1M. Again - I'd be surprised if there's even 5 fully vested that still have shares.

And even if they still have the shares, they'll be lucky to sell them at a $2B valuation - let alone $11B. So cut those numbers by 1/5th (or more).

Bolt would've been a SCREAMING success for a startup. Unless you were engineer #1-5 - you'd be better off as an L4 at FAANG.

No, and not just because it’s not a publicly traded security. They did nothing illegal. Maybe it should be but sadly it’s not.

> it’s not a publicly traded security

FYI, this is irrelevant with respect to the SEC's jurisdiction [1].

[1] https://www.sec.gov/oiea/investor-alerts-bulletins/ib_privat...

Your link outlined that unregistered securities don’t have oversight by the SEC and outlined how you better be careful what you’re getting into. It didn’t outline how the SEC regulates them beyond limits on what you can do with them without registering them. They wouldn’t be generally involved in non public shares agreements.

> unregistered securities don’t have oversight by the SEC

The SEC created a safe harbor for registration. The Securities Act of 1933 regulates all securities [1]. This is why private companies issuing shares have to hire securities lawyers.

[1] https://en.m.wikipedia.org/wiki/Securities_Act_of_1933

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