That’s a LONG time (in total) for employees to wait for liquidity. Yes, they likely provided some opportunities for early employees to liquidate some of their holdings, but it’s got to suck to sit on that much funny money for so long.
A direct listing would be very unfair to the banks that have patiently waited years to take a multi-billion-dollar chunk of Stripe’s upside in exchange for setting the IPO price (integer between 20 and 50).
but at least in an IPO the company would get a financing round, and the banks get to manipulate the market with a stabilizing bid indefinitely
direct listings completely rely on retail buyers for liquidity, and even in the frothiest markets that's not enough money in the face of all employees and the company dumping shares immediately
They've had several options for employees to liquidate some of their holdings before now. They've generally only been open to current employees, but one a few years ago was also open to past employees.
Noob question that I am sure is answered many times. What are the catalysts for a private company switching from options to RSUs (double trigger). In my previous role I got RSUs (double trigger), but now at a much smaller startup I have an option package. As an employee RSUs are a bit easier to make sense of, but both are equity instruments at the end of the day. When, and why does that transition happen?
At Stripe, when your RSU vest, you still don't have the ability to buy the shares. Instead you have to wait for a liquidity event, or for 7 years to pass (making the shares worthless).
It’s honestly perplexing that so many tech companies have stayed private for such a long period of time. Especially in an era of rising interest rates and rising mortgage costs, people really want to be able to sell their stock. The difference between packages with equity you can sell and equity you can’t sell is gargantuan and there are massive benefits to having a public price that lets people fairly value that equity. Hoping to get fair value in a private market transaction is far from ideal and many employees will feel they are being forced to pay an unfair premium for liquidity.
Why go public when until 9-12 months ago you could raise IPO level cash ($100-300mil) in a Series D/E/F/G and with none of the SEC scrutiny. It's better for founders to remain private as long as possible. It's better for employees for companies to go public as soon as possible. For VCs it depends on what stage they are at in capital allocation (companies funded in the earlier stage of a fund will have more leeway cuz VCs don't need to pay back their investors, but companies funded at a later stage will be pushed to exit faster cuz you gotta make the investors whole)
The Collision brothers and the Hindawis (Tanium founders) have both been very vocal about this point.
What's perplexing for me is that, yesterday on HN I've seen crowd with pitchforks demanding CEOs of publicly traded companies to be laid off, along with the employees for giving up to the pressure of shareholders.
Today I'm seeing ton of comments about how company has to go public, because otherwise employees (who have excellent compensation apart from stock) will have to wait a few months to liquidate their assets.
Seems like certain altitude doesn't come with MBA title, like some want to believe :-)
Considering so many public, profitable tech companies saw their valuations go down by 50-70% in that same period, that still seems too little of a cut.
Public companies have more external influences on their valuation. It's not like they literally lost 50-70% of their intrinsic value, only what the market with the associated psychology says they are worth. Private companies can stick closer to that intrinsic value.
> Private companies can stick closer to that intrinsic value
It's normally the opposite. Public markets are a lot better at judging intrinsic value than a handful of VCs. Every single private company out there is either wildly over or under-valued, more so at earlier stages.
Not to mention, VC valuations have all sorts of hidden stipulations such as liquidity preferences which skew headline private valuation numbers unnecessarily high. Public markets have a full view of the cap table and can better evaluate price w/o hidden tricks.
Stock has very little to do with “intrinsic value”. The share price is what an investor is willing to bet on the future of the company improving.
This is why companies with lousy future outlooks will sell for a lower price than their assets - debts.
There is no intrinsic value that private companies can stick to. They just have the power of controlling sales so they take sellers out of the market until they get the price they want at a volume they are comfortable with.
Stripe isn’t “intrinsically” worth anything that anyone will agree on. To one person it would be the cash in the bank minus liabilities. To someone else it would be a hefty multiple on that because they believe in the business.
Yes, this is important. Stock price reflects future earnings growth potential. That's a mouthful(!), but consider if Google announced 0% growth in earnings, but still same profits. Their stock price would be crushed. This essentially happened to all major investment banks after 2008 crisis. When 30:1 leverage on balance sheet was no longer an option, forwarding looking earnings growth looked tiny compared to 2007.
I see the term "intrinsic value" frequently used incorrectly. Mostly, it is used in finance to describe the value of an option when "in the money" (underlying is above/below strike price for call/put). Perhaps they means book value, which the value of the company if all assets and liabilities were sold at market prices. For most pure services companies, it is very low (perhaps negative due to liabilities), as the accounting rules for book value are very strict.
The use I’ve seen in the vernacular is “what are the cash flows worth on their own?” (Discounting back the future ones adjusted for risk) Sometimes people state they know it with confidence, but it’s subjective too (the science on discount rates and predicting growth is a lot weaker than Physics).
It leaves out things like “what might the IP be worth to someone else?” and “What could the company do with better management?”
To your point, it’s frequently less than what the company trades at. Sometimes the opposite is true, and the company trades for less than the cash value of its assets minus liabilities.
No. (Channels patio11) As a society we have decided to delegate a bunch of responsibilities to the companies that move money. The most notable one is fraud protection. The companies that make this much money do so by pretending that a transfer of money is a clean, simple, and absolute thing. In reality it is messy, reversible, and fraud-prone. Being able to transfer $1B dollars as easily as you are able to transfer $1 would be a failure of the system, not a feature.
Dispute resolution is not where the 2-3% go (as evidenced by disputes also existing on US debit cards, where it's 0.05%, and EU credit and debit cards, where it's 0.3% and 0.2% respectively).
Some of it is spent by the issuer on fraud expenses that they are assigned liability for, but given the same reasoning as above, if that was more than 0.05%, there wouldn't be any profitable debit issuers left in the US (and similarly for the EU, although the regulator is changing the fraud calculus there significantly by enforcing strong cardholder authentication, so it's not an apples to apples comparison).
In other words, if there was political will to get rid of credit card points in the US, we could have all of this for much cheaper. (We might need to look into scheme fees too while we're at it, e.g. by finding a market solution that creates actual competition there.)
That would be whoever made the cards fault. We don't give credit for cleaning up your own mess, that's the minimum standard for engaging in a beneficial relationship.
It's not a value proposition from gmail that you can't access my inbox just from knowing my address.
I can't believe you can be a $400B company and the value comes from stopping fraud that you enabled by your own product design.
They took care of it for themselves, when someone commits fraud it isn't your problem because they used your name to do it.
Imagine if you were defrauded for a few hundred bucks by someone claiming to be a big celebrity. You probably wouldn't even be able to get into contact with the actual person, let alone have them jump through a bunch of hoops, spend time on hold with your staff or go to the post office to send you copies of documents. They wouldn't bother to respond to you, they have no obligation to, whatever happened had nothing to do with them.
No kidding. Zelle looks so dangerous from consumer point of view. It is so easy to get scammed and almost impossible to be made whole. I am fine with Zelle if banking regulators require Reg E. The best part of Reg E: Since banks are almost completely responsible for fraud in their customers named, they take it very seriously!
To be fair, the trade-off is that there aren't any fees and it's nearly instantaneous. For the type of transaction similar to handing someone you know a wad of cash, it seems pretty good.
I don't think visa is doing it by hand and pencil and paper though, and the value in those companies is that they're taking bioff the top of every transaction that runs on their rails. so it's already automated too a huge degree,
it's just that automation is what gives those companies that market cap
by being the digital rails. without visa/mc, all you have in your wallet is a piece of useless plastic. there's huge value in the convenience of not having to use cash, and then the rewards programs on top of that.
The Fed’s 2011 rules capped fees at 21 cents plus five basis points of each transaction, and also allowed an additional one cent fee per transaction for fraud prevention, where applicable.[0]
And by using Bitcoin to automate all these transactions you get a bunch of very cool features such as constantly being at risk of losing your life savings due to phishing, scamming, hacking, etc., etc., etc. unless you store a hard wallet in your intestines and memorize the recovery words (better hope you don't forget any or your life savings is gone!). The cool thing about all of this is that it's a feature of Bitcoin to be able to irreversibly lose your life savings, without any ability to recoup your losses.
All of this to say that Bitcoin is obviously the way forward for global transactions, despite the fact it processes transactions as slow as molasses and the only way to make it faster (Lightning Network) is to sacrifice the checks and balances that maxis praise as the hallmark of Bitcoin lol
It's a different kind of cash (like banknotes). It has different security tradeoffs because the owner is the custodian and you aren't paying a chain of intermediaries.
It's not a feature of cash that it can be stolen, every object can be stolen. The distinctive attribute is transactions are public and immutable.
A car can be driven by its owner anywhere they like. If someone described a car to you as a suicide box you can crash and die in - you might say yes, the fact that cars can be driven freely by their owners means you might drive into someone else. But that's a consequence of the feature, not the feature itself.
The difference of course between all of the rubbish that crypto/Bitcoin is (since they are, at the end of the day, in the same boat), is that by entrusting central parties to handle financial transactions in our traditional financial systems we have methods by which we can reverse transactions, whereas in any blockchain system there is no real authority, by design, so any stolen assets are lost forever. There aren't security "tradeoffs", because there is not a way in which any blockchain based currency is any more secure than current finances, outside of the fact that no bank or government entity could take your digital beanie babies because they don't have the token, which isn't an issue in traditional banks either unless you're a criminal for the most part. And in order to get this "advantage" of blockchain, you have to completely remove its ability to be used as a currency since for any amount of crypto or Bitcoin to be useful in the real world it almost always has to be converted back into fiat, once again centralizing it. The whole concept is extremely flawed, hasn't really gained any ground outside of FOMO'ers, and will likely die out again soon, thankfully.
- you can use an escrow account to reverse the transaction if needed
- having full ownership of your money and it being censorship resistant (depending on the crypto) is certainly a plus if you don't fully trust your government.
- the conversion to fiat is depending on adoption: the more adoption there is, the less necessary that would be.
- you can decide to wire your money 24/7, internationally, instantly and with no fees (with the right crypto)
Overall you get more control of your money. If you think of money as just another kind of information, it's normal to expect it to evolve in the digital age we are living in.
This reply was excellent. This part really made me laugh:
unless you store a hard wallet in your intestines and memorize the recovery words (better hope you don't forget any or your life savings is gone!)
To continue the "lulz", South American drug traffickers will soon be cutting those people open to extract their hard wallet!
Enough with the jokes! Real question: Sometimes you read about FBI chasing down ransomware groups and recovering Bitcoins. How do they do it? If they can identify the wallet, how do they lay claim? Do they find where the wallet is hosted and force exchange to transfer wallet to FBI?
Please don't read this post as an attempt to defend Bitcoin, nor say that FBI is a good way for me to reverse a fraudulent Bitcoin transaction!
> And by using Bitcoin to automate all these transactions you get a bunch of very cool features such as constantly being at risk of losing your life savings due to phishing, scamming, hacking, etc., etc.
All lies.
> unless you store a hard wallet in your intestines and memorize the recovery words (better hope you don't forget any or your life savings is gone!)
Lies. Just write them down and store them securely. You can memorize them if you like. It's also wise to store multiple physical copies in various locations to avoid this exact scenario.
> The cool thing about all of this is that it's a feature of Bitcoin to be able to irreversibly lose your life savings, without any ability to recoup your losses.
Yes, you can't be utterly careless (and I'm not sure what the argument is for wanting to be).
> the only way to make it faster (Lightning Network) is to sacrifice the checks and balances that maxis praise as the hallmark of Bitcoin
Yes, which makes sense for small transactions between trusted parties. Large transactions can and should be done on-chain (also with trusted parties).
--
I'll continue to listen to the signal [1], not the noise. What makes me happiest is that the people who deserve to win the most will win over the people who deserve it the least. It will be the greatest wealth transfer humanity has ever seen and it won't require any violence or coercion.
Doesn't bother to point out what part of it was a lie (because it isn't a lie)
> Lies. Just write them down and store them securely.
Welcome to the future of finance, make sure you don't lose your seed phrases written down on paper (it's the future, trust me bro)
> Yes, you can't be utterly careless
Contradicts saying that I was lying that you can lose your life savings due to phishing, scamming, or hacking, and that if you lose your seed phrases and can't access the wallet then your digital doubloons are gone forever
> Doesn't bother to point out what part of it was a lie (because it isn't a lie)
This "constantly being at risk of losing your life savings due to phishing, scamming, hacking, etc." is a lie. There is no inherent property of Bitcoin that makes you vulnerable to these. Any vulnerability in those regards is an individual issue, just like with the current system. You could mitigate those away with paid services under a Bitcoin standard (which is great because you could actually pick the vendor you thought could do the job best).
> Welcome to the future of finance, make sure you don't lose your seed phrases written down on paper (it's the future, trust me bro)
> Contradicts saying that I was lying that you can lose your life savings due to phishing, scamming, or hacking, and that if you lose your seed phrases and can't access the wallet then your digital doubloons are gone forever
Fair enough. This is where an exchange comes in. You still have the option to trust a third-party to hold your Bitcoin if you wish. But of course, that comes with its own risks, just like trusting a bank (which can only ever guarantee up to $250K worth of your money under FDIC).
Almost like handwaving is the only way to disregard any of the real concerns people bring up about Bitcoin or crypto because there's not really any good way to dispel them with much logical proof.
It doesn't need to. Transact with vendors you actually trust who have a track record you can verify (which necessitates people being trustworthy to earn business—unlike our current economic order).
How would that not lead to the inevitable concentration of economic activity in a few trusted platforms?
Today, I can shop at pretty much any merchant on the web, under the reasonable expectation that my bank will file a dispute for me if the merchant makes a run for it and I never receive any goods or services. Even in case of merchant bankruptcy, I'm not exposed to any risk.
In a world of non-reversible payments, I'd probably stick to Amazon exclusively. That seems pretty bad for small/new/independent merchants.
> How would that not lead to the inevitable concentration of economic activity in a few trusted platforms?
Because it would force people to be honest in order to eat. Economic activity as a whole would become a lot more transparent because people will avoid hiring you or buying from you if you have a bad reputation. The inverse is also true, rewarding the business owner who invests in quality and customer service.
> if the merchant makes a run for it
Again, this is a discernment issue not a systems issue. In that particular case, you can set up an escrow transaction that only releases funds if the transaction goes through. EBay has already proven, too, that most people are honest by default so this is a non-issue.
> In a world of non-reversible payments, I'd probably stick to Amazon exclusively. That seems pretty bad for small/new/independent merchants.
> Are you suggesting that either all sellers know a) the credit worthiness of their customers or b) don’t extend any credit?
That's up to the business owner, but considering the utter destruction its done to the world I would say most businesses should not extend any credit.
The nice thing about Bitcoin is it's a transaction layer and people can build services on top of it. Someone could start a guarantor business that other businesses pay to verify creditworthiness. They do that already now, the difference being that it's a completely dark system controlled by people with no incentive to fairly or accurately represent your worthiness.
Interesting timing, wouldn't think it's optimal given macro conditions, but perhaps they don't want to wait however long it'll take to get back to the frothy markets
They’re options that are set to expire, not RSUs. Yes, the employees could exercise them to prevent them from expiring, but then Uncle Sam comes to collect his dues. And that’s where illiquidity burns you.
> They’re options that are set to expire, not RSUs.
Both options and RSUs are required by law to have expiration dates. And it's plausible that either or both could have expiration dates within the next 12 months.
Equity compensation and what it's valued at is a big factor in choosing to work at Stripe. If they start letting RSUs expire, it will make ~everyone value their equity significantly less; Stripe would likely have significant difficulties finding and retaining talent.
It's not in the company's interest to piss off employees who can't afford to exercise their options without being able to sell them.
My company recently got bought by a privately owned company. Because of the ownership structure of the purchasing company we weren't allowed to exchange our options or let new ones vest so my company's board approved cancelling and reissuing everyone's options with an acceleration clause so they'd completely vest at completion so we'd all get a full payout. They did this because they knew if they didn't that there would be an exodus of employees before the purchase went through.
Employees represent a large % of the value of the company, if they all leave you just have a bunch of tech that no one else knows how to maintain or use. Institutional investors typically have such a large proportion of the shares that it's worth it to them to not just screw over employees because the employee sticking around and keeping shares is worth more than they'd save.
In some ways, yes, but I think if you game it out, you see how the company loses in a number of ways. First, repetitional risk. Second, it’s likely that a liquidity provider would emerge who could offer, basically, to buy call options from individual holders for enough premium to cover the taxes due on exercise. (Stripe would not want an unaffiliated 3rd party accumulating a large position)
If they don't let them exercise, the existing employees will rightly see it as funny money and not actual compensation. They won't be employees for much longer after that.
Especially since Stripe has steadfastly refused to go public so far...
I think they mean it's 30% higher than 'market'. I've seen article stating that Stripe's current internal valuation is like 60B or so. That valuation might be what they're referring to.
Maybe they should have IPO'd or directly listed in 2019 at the very peak when everyone else was rushing to the exit as I said before [0]. Of course this is also not in hindsight either. [1]
Seems like they now don't want to wait anymore and just unload their shares into the market and especially onto retail investors.
Coinbase on the other hand is very employee friendly in terms of liquidation. Their employees are rich as fuck with direct listing (no lockup) at the height of the market.
Just think about it.
Coinbase, who is ridiculed for being apolitical, treats employees better than Stripe.
Stripe reminds me Cisco systems in 1999. Cisco powered the Internet economy. Savvy CEO and team and amazing execution. Stock traded at $60 in 2001. Went down to $16 in just 2 years and still at $40 after 25 years.
Stripe is equally relevant.
It may not achieve the same private market valuation of $95B for some time. But we love the company, and will continue to use it as a partner, customer, and cheer leader.